[Senate Hearing 118-727]
[From the U.S. Government Publishing Office]
S. Hrg. 118-727
THE FUTURE OF BROADBAND AFFORDABILITY
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HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS, MEDIA,
AND BROADBAND
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
__________
MAY 2, 2024
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
Available online: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
61-850 PDF WASHINGTON : 2025
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
MARIA CANTWELL, Washington, Chair
AMY KLOBUCHAR, Minnesota TED CRUZ, Texas, Ranking
BRIAN SCHATZ, Hawaii JOHN THUNE, South Dakota
EDWARD MARKEY, Massachusetts ROGER WICKER, Mississippi
GARY PETERS, Michigan DEB FISCHER, Nebraska
TAMMY BALDWIN, Wisconsin JERRY MORAN, Kansas
TAMMY DUCKWORTH, Illinois DAN SULLIVAN, Alaska
JON TESTER, Montana MARSHA BLACKBURN, Tennessee
KYRSTEN SINEMA, Arizona TODD YOUNG, Indiana
JACKY ROSEN, Nevada TED BUDD, North Carolina
BEN RAY LUJAN, New Mexico ERIC SCHMITT, Missouri
JOHN HICKENLOOPER, Colorado J. D. VANCE, Ohio
RAPHAEL WARNOCK, Georgia SHELLEY MOORE CAPITO, West
PETER WELCH, Vermont Virginia
CYNTHIA LUMMIS, Wyoming
Lila Harper Helms, Staff Director
Melissa Porter, Deputy Staff Director
Jonathan Hale, General Counsel
Brad Grantz, Republican Staff Director
Nicole Christus, Republican Deputy Staff Director
Liam McKenna, General Counsel
------
SUBCOMMITTEE ON COMMUNICATIONS, MEDIA, AND BROADBAND
BEN RAY LUJAN, New Mexico, Chair JOHN THUNE, South Dakota, Ranking
AMY KLOBUCHAR, Minnesota ROGER WICKER, Mississippi
BRIAN SCHATZ, Hawaii DEB FISCHER, Nebraska
EDWARD MARKEY, Massachusetts JERRY MORAN, Kansas
GARY PETERS, Michigan DAN SULLIVAN, Alaska
TAMMY BALDWIN, Wisconsin MARSHA BLACKBURN, Tennessee
TAMMY DUCKWORTH, Illinois TODD YOUNG, Indiana
JON TESTER, Montana TED BUDD, North Carolina
KYRSTEN SINEMA, Arizona ERIC SCHMITT, Missouri
JACKY ROSEN, Nevada J. D. VANCE, Ohio
JOHN HICKENLOOPER, Colorado SHELLEY MOORE CAPITO, West
RAPHAEL WARNOCK, Georgia Virginia
PETER WELCH, Vermont CYNTHIA LUMMIS, Wyoming
C O N T E N T S
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Page
Hearing held on May 2, 2024...................................... 1
Statement of Senator Lujan....................................... 1
Letter dated May 1, 2024 to Hon. Ben Ray Lujan and Hon. John
Thune from Jonathan Myles Laurier Cannon, Policy Counsel
Tech and Innovation, R Street Institute.................... 58
Prepared statements from various organizations supporting the
extension of the Affordable Connectivity Program (ACP)..... 62
Statement of Senator Cruz........................................ 3
Statement of Senator Thune....................................... 5
Statement of Senator Vance....................................... 32
Statement of Senator Klobuchar................................... 34
Statement of Senator Peters...................................... 38
Statement of Senator Welch....................................... 40
Statement of Senator Capito...................................... 41
Statement of Senator Warnock..................................... 43
Statement of Senator Tester...................................... 47
Statement of Senator Markey...................................... 49
Statement of Senator Rosen....................................... 51
Letter dated April 26, 2024 to Hon. Mike Johnson, Hon. Chuck
Schumer, Hon. Hakeem Jeffries, Hon. Mitch McConnell, Hon.
Tom Cole, Hon. Patty Murray, Hon. Rosa DeLauro and Hon.
Susan Collins from Alliance of Community Health Plans,
Association for Community Affiliated Plans, Blue Cross Blue
Shield Association, Medicaid Health Plans of America,
National MLTSS Health Plan Association, and Special Needs
Plans Alliance............................................. 53
Statement of Senator Hickenlooper................................ 56
Witnesses
Jennifer Case Nevarez, Director and Lead Educator, Community
Learning Network (CLN) and Member, Broadband and Digital Equity
Support Team, New Mexico and the Office of Broadband Access and
Expansion (OBAE)............................................... 7
Prepared statement........................................... 9
Kathryn de Wit, Project Director, Broadband Access Initiative,
The Pew Charitable Trusts...................................... 12
Prepared statement........................................... 13
Blair Levin, Policy Advisor, New Street Research; Nonresident
Senior Fellow, Brookings Metro................................. 17
Prepared statement........................................... 19
Paul Winfree, Ph.D., President and CEO, Economic Policy
Innovation Center.............................................. 24
Prepared statement........................................... 25
Appendix
Letter dated May 2, 2024 to Hon. Ben Ray Lujan, Hon. John
Thune, Hon. Maria Cantwell and Hon. Ted Cruz from Gary
Bolton, President and CEO, Fiber Broadband Association..... 67
Response to written questions submitted to Kathryn de Wit by:
Hon. Tammy Duckworth......................................... 68
Hon. Ted Cruz................................................ 69
Response to written questions submitted by Hon. Ted Cruz to:
Blair Levin.................................................. 71
Paul Winfree, Ph.D........................................... 93
THE FUTURE OF BROADBAND AFFORDABILITY
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WEDNESDAY, MAY 2, 2024
U.S. Senate,
Subcommittee on Communications, Media, and Broadband,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., in
room SR-253, Russell Senate Office Building. Hon. Ben Ray
Lujan, presiding.
Present: Senators Lujan [presiding], Klobuchar, Markey,
Peters, Tester, Rosen, Hickenlooper, Warnock, Welch, Cruz,
Thune, Young, Vance, and Capito.
OPENING STATEMENT OF HON. BEN RAY LUJAN,
U.S. SENATOR FROM NEW MEXICO
Senator Lujan. And we'll come to order. Today this
subcommittee is convening a hearing on the future of broadband
affordability.
So I want to thank our Ranking Member, Mr. Thune, as well
as Chair Cantwell and Ranking Member Cruz for working with me
to schedule this hearing on such an important topic.
I want to start with a story from one of my constituents.
Her name is Kelly, and she's from a small community by the name
of Ranchos de Taos out in New Mexico. Now she reached out to my
office last month about the importance of the Affordable
Connectivity Program. And here's what she said, ``In my
capacity as program manager for New Mexico Veterans up bound--
Upward Bound program at UNM Taos, my team and I serve veterans
in eight northern New Mexico counties in some very rural areas.
We are finding it more difficult to connect our Native veterans
who may not even be aware of the benefits that they've earned,
or are unable to apply for them since most communications is
via the Internet. My team is working on that. Many live in
extremely remote areas and only receive phone or Internet
service when they go into the nearest town. That's not fair.
They are no less deserving of veteran benefits than anyone
else.''
Now I want to emphasize that point, because it's why we're
here today. The people who rely on the Affordable Connectivity
Program to connect with health care providers, attend work or
school, or access their benefits are no less deserving anywhere
across America than anyone else.
There are so many areas across the country where families
have no options for high-quality broadband service. That's why
we worked together to pass the Bipartisan Infrastructure Law,
which included the Broadband Equity Access and Deployment,
otherwise known as the BEAD Program, to build out broadband
networks in regions of our country that have, until now, been
left behind.
But building the network isn't the end of the story. We
have to make sure that people can afford to access it. That is
why we created the Affordable Connectivity Program in a
bipartisan way, to help low-income families afford Internet
service by contributing a $30-per-month benefit. Right now
there are over 23 million households participating in this
program. That's more than 55 million people.
But it's not only benefiting these individuals and
families, it's benefiting their local communities as well. A
study from the Benton Institute for Broadband and Society
published last month found that every dollar that is put into
ACP returns nearly two dollars in impact for the recipient of
the benefit. It gives families access to better-paying jobs, to
training and education, to create economic mobility, to better
deals on groceries and household goods. It means stimulating
our local economies.
So the time is now to save this program. This last full
month of funding for ACP, we saw the expiration just a few days
ago.
Now each household will only receive a partial benefit if
Congress fails to act. That will be the end of the Affordable
Connectivity Program. And--and mind you, all of these customers
across America received notices back in January as well that
this program was going away. Congress had a little bit of time
to be able to fix things, to get this correct.
But here's another one where Congress let the American
people down. My colleagues and I have been working to find a
solution to keep this program going. Thank you to Chair
Cantwell, who has introduced legislation to restore the FCC's
auction authority and use $7 billion in auction proceeds to
keep this program alive.
And thank you to Senator Welch and Senator Vance, who have
introduced legislation to fund the program through the end of
the year with appropriations. They're both strong proposals to
temporarily fund the program and give Congress time to find a
long-term solution so we don't face this cliff every 6 months
or every year.
Now the Universal Service Fund Working Group that I've been
proud to be a part of and lead with Ranking Member Thune has
been working on a long-term solution.
Once we save this program in short term, I believe, I'm
looking forward to bringing a solution to this committee that
provides a permanent funding mechanism, modernizing programs,
looking at what the out years will certainly look like here to
earn bipartisan support in both chambers.
And I'm very proud that this working group has had
participation from members of the Senate, members of the House,
and members of leadership. It has really been incredible to see
how these thoughts and these ideas, and embracing some of those
differences, actually shows where we agree on how to get this
achieved. So I very much appreciate that.
Now it would be a significant waste of government funds to
let this program lapse. It would mean letting all the time and
resources the Federal Government and our state and local
partners have put into standing up the program and enrolling 23
million households go to waste.
I'm looking forward to hearing from our panel of witnesses
who will provide clear evidence that we are on the brink of
wasting significant Federal investments and causing real harm
to our constituents. Each will share their perspective on the
role that the Affordable Connectivity Program plays in our
economy and in the lives of low-income families across the
country.
Now our panelists, we're going to hear from Ms. Jennifer
Case Nevarez, who is the director and lead educator of
Community Learning Network and member of the Broadband and
Digital Equity Support Team for New Mexico and the Office of
Broadband Access and Expansion. I'm proud that Ms. Nevarez has
joined us this morning all the way from Santa Fe, New Mexico to
share what she's seen on the ground, and the importance of ACP,
and the consequences if we let it lapse.
Ms. Kathryn de Wit, Project Director of the Broadband
Access Initiative at the Pew Charitable Trust, who will speak
to the economic importance of ACP to families across this
country.
Mr. Blair Levin, policy advisor at New Street Research and
nonresident senior fellow at Brookings Metro, who will speak to
the economic impact of a potential ACP lapse across our
economy.
And Dr. Paul Winfree, President and CEO of the Economic
Policy Innovation Center, who Ranking Member Thune will
introduce. Now I look forward to hearing from each of you.
And I now want to recognize Ranking Member Thune for his
opening statement.
We're going to hear first from the Ranking Member of the
Full Committee, Senator Cruz of Texas. Senator Cruz.
STATEMENT OF HON. TED CRUZ,
U.S. SENATOR FROM TEXAS
Senator Cruz. Thank you, Mr. Chairman. Thank you to Ranking
Member Thune, and thank you to our witnesses today.
The United States is the standard bearer for high-speed
Internet connectivity. During the pandemic, American Internet
providers significantly outperformed our more highly regulated
European counterparts with faster and more competitive service.
Yet this highly functioning industry is under relentless
attack by the Biden administration. Despite being handed a
generational opportunity to connect all Americans, this
administration has made it clear they would prefer to assert
government control of the Internet.
This was epitomized by last week's FCC party-line vote to
subject the broadband industry to an oppressive regulatory
regime under the pretense of so-called net neutrality.
This follows the FCC's digital equity power grab late last
year in which the agency asserted control over nearly every
aspect of the broadband business, and opened providers to
expansive, indeterminate, and crippling liability under a
disparate impact standard.
The Biden administration claims that it wants to improve
broadband affordability for American families. But the FCC is
sabotaging these goals. What happens when companies need to
divert significant resources to--towards complying with woke
Biden priorities over their customers? Prices go up, investment
and innovation declines, and Americans suffer.
And we know this from experience. When the Obama FCC
imposed Title II on broadband, their first iteration of net
neutrality in early 2015, capital expenditures fell by $500
million that year, and by another $2.7 billion in 2016. That
hurts American consumers across the country.
We see similar trends in the Biden administration's
mismanagement of Congress's massive broadband investments--over
$125 billion in the last 4 years. The Biden NTIA has
prioritized woke social policies, union mandates, tech biases,
and price controls at the expense of delivering high-speed
Internet to unserved Americans. The largest of these programs,
a $42 billion broadband infrastructure program, is already
being waylaid.
Biden administration officials are withholding and delaying
funding from states like Virginia, where Governor Youngkin's
team is standing up to the coercive and lawless demands of the
Biden administration.
Likewise, the Affordable Connectivity Program is not
working as Congress intended. To assist those for whom cost was
the barrier to gaining Internet access, ACP, which gives a $30
monthly subsidy for Internet service and $75 per month if
you're on tribal lands, was given a record $14 billion budget.
This was anticipated to last several years.
But the FCC deliberately oversubscribed the program,
blowing through the money in record time. We have heard from
the White House and from Chairman Rosenworcel that this massive
welfare program should be considered a success, because 23
million households enrolled in it. But it turns out the vast
majority of these people already had high-speed Internet.
Here's an FCC survey showing that just 22 percent of the
households receiving the taxpayer subsidy were previously
unsubscribed to broadband. This means that for every household
that didn't subscribe to premium Internet, the Federal
Government is subsidizing four households that did.
Beyond this massive inefficiency and waste, reports have
also found, unsurprisingly, that the ACP has had inflationary
effects on the price of Internet. One of our witnesses, Dr.
Paul Winfree, analyzed the data and found that in places where
ACP enrollment is the highest, we see higher prices.
A less technical, but no less telling report from the
National Review used archive records from the Internet to show
that companies treat the $30 subsidy now as the new price
floor. Companies that used to offer broadband plans for $10 or
$15 a month now charge $30 for the same or marginally upgraded
service.
History has shown that when the Federal Government starts
subsidizing demand--in higher education and agriculture, the
subsidy gets capitalized, and prices go up. After all, why
would corporations ever leave free money on the table?
While those who receive the subsidy may realize an
immediate cost reduction, the market prices rise for everybody
else.
This rising price creates a call for more subsidies and
higher taxes to fund those additional higher subsidies, and
eventually a government takeover of the Internet to provide it
for free.
To the extent there are truly indigent people who cannot
afford connectivity, there is a program already designed for
them. It's called Lifeline. If it's not working well, we should
look to improve it, not to impose higher taxes on millions of
hardworking Americans to cover the Internet bills of their
neighbors who are already willing and able to pay for it
themselves. I'm open to a discussion on these reforms.
The road to broadband as a publicly regulated utility is
not one Americans can afford. To ensure that all Americans can
access and benefit from high-speed connectivity, the
administration should reverse course, abandon toxic regulatory
mandates, remove unnecessary barriers to investment, and ensure
Federal broadband subsidies are working as Congress intended.
An innovative and affordable broadband future can only be
achieved if the Federal Government puts Americans' prosperity
over its urge to assert regulatory control.
Thank you.
Senator Lujan. Thank you, Senator Cruz.
I now recognize the Ranking Member of the Subcommittee, Mr.
Thune, for his opening statement.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman, and I appreciate
the opportunity to work with you on the working group. I think
there are a number of areas in the Universal Service Fund
programs that are--have been needed; oversight, and reform, and
looking at ways that we can make those work more efficiently.
And so I look forward to our continued efforts in that regard.
And thank you for the--having the hearing this morning.
Thank you to all our witnesses for being here.
Let me start by saying that an Internet connection provides
significant opportunities to run a business, provide health
care, or do homework. And as a member who represents a rural
state, I remain committed to the bipartisan principle of
universal service and ensuring that Americans in all parts of
the country have access to communication services comparable in
quality and price to those in urban areas.
Today, we are here to examine the state of broadband--
broadband affordability programs. The FCC has a long history
with broadband affordability through its Lifeline program, as
has been mentioned, which, despite existing for nearly 40
years, has not been a broad success story. A carefully
designed, properly administered broadband affordability program
to help those Americans who, without a subsidy, would be unable
to afford reasonable level of connectivity, is an important
part of universal service.
But unfortunately, the FCC's Lifeline program, which is
currently part of the Universal Service Fund, has not lived up
to this promise. The rampant waste, fraud, and abuse within the
Lifeline program has been well documented over the years.
Unfortunately, much like the FCC's Lifeline program, the
Affordable Connectivity Program, or ACP, seems to be plagued
with similar inefficiencies.
ACP, what initially began as a program to help consumers
stay connected during the pandemic, was expanded, as many
government programs tend to be, into a much broader and much
more expensive program. As it's currently designed, ACP does a
poor job of directing support to those who truly need it,
namely those who would not get service without a subsidy.
With overly broad eligibility criteria, ACP allows over 40
percent of American households to receive a subsidy. If all of
the eligible households were enabled or I should say were
enrolled into ACP, the program would cost the taxpayer over $19
billion annually.
The inefficiencies in both Lifeline and ACP are in large
part a direct result of the FCC's failure to set performance
goals and address the fundamental question of whether or not
either of these programs are an effective means of increasing
adoption among low-income consumers. Without performance goals,
we have no evidence to support that ACP or Lifeline are
effective in connecting non-subscribers to the Internet.
The FCC's own survey, as Senator Cruz pointed out,
indicates that at least--or I should say at best, about 22
percent of the current ACP subscribers did not have an Internet
connection prior to ACP. It is imperative that the FCC conduct
such an analysis so that we can make informed decisions on the
future broadband affordability programs for truly low-income
Americans. And simply saying 23 million households will lose
broadband if ACP does not receive new funding is not
undertaking a fundamental analysis.
The American people deserve better, and we need an honest
assessment of how to best deliver services to those actually in
need. To that end, I appreciate Senator Lujan's work leading
the USF Working Group with me and other members of this
committee to address the needs and shortfalls of the USF
programs.
We also must recognize the Federal Government will not
solve the digital divide on its own.
The United States' light regulatory--or light-touch
regulatory approach to broadband policy has resulted in
telecommunications providers in South Dakota and the rest of
the country making network reliability, affordability, and
resiliency a priority. During the pandemic, when demand for
reliable Internet soared, U.S. broadband providers were able to
keep Americans connected, which was not the case in other
countries.
And now as ACP winds down, I appreciate how the private
sector is stepping up, turning to low-income programs they
offered prior to ACP.
The White House and some in Congress have called on
companies to continue offering free service to consumers
despite ACP dollars running out. This, of course, is akin to
rate regulation and demonstrates that Democrats--what Democrats
have wanted all along.
The efforts to promote quality and affordable broadband are
under attack by the Biden FCC. Just last week, the FCC once
again asserted broad new government powers over the Internet,
using rules that were designed for telephone monopolies back
during the Great Depression. The last time these heavy-handed
regulations were imposed, as Senator Cruz pointed out,
broadband investment declined. And there's good reason to
believe this will happen again.
These new rules would also imperil the United States'
position at the forefront of Internet innovation. Biden's FCC
should be focused on addressing real challenges, such as
reducing regulatory burdens and thus the cost for broadband,
not searching for a problem where one doesn't exist.
Before I close, I'd also like to add that I hope we can
hear from the FCC directly about their broadband affordability
programs and many other important issues. It's unacceptable
that this committee has not held an oversight hearing of the
FCC for over 1,400 days.
I appreciate each of our witnesses for being here today and
I look forward to the discussion. Thank you, Mr. Chairman.
And Dr. Winfree is our fourth witness. He's President and
CEO of Economic Policy Innovation Center. He's an economist,
trusted policy--public policy advisor, and served in top
management policy roles in the White House, the U.S. Senate,
and in think tanks.
So it's great to have you here along with the rest of our
panel of witnesses. We look forward to hearing from you all.
Thank you.
Senator Lujan. Thank you very much, Mr. Thune. And before I
recognize myself for five minutes of questions, I want to wish
Peter Welch a happy birthday. So if everyone might be able to
just give him a round of applause, please, and show our
appreciation to Senator Welch.
[Applause.]
Senator Welch. He's a pretty nice guy, but I appreciate the
embarrassment.
Senator Lujan. Thank you, my friend.
Senator Welch. Thank you, Ben Ray.
Senator Lujan. So before I recognize myself for questions,
I want to make sure that we hear from our distinguished panel
as well.
So Ms. Nevarez, you'll begin, and each of you will be
recognized for five minutes as well. You'll be able to submit
your full testimony into the record as well. Ms. Nevarez,
you're recognized.
STATEMENT OF JENNIFER CASE NEVAREZ, DIRECTOR AND LEAD EDUCATOR,
COMMUNITY LEARNING NETWORK (CLN) AND MEMBER, BROADBAND AND
DIGITAL EQUITY SUPPORT TEAM, NEW MEXICO AND THE OFFICE OF
BROADBAND
ACCESS AND EXPANSION (OBAE)
Ms. Nevarez. My name is Jennifer Nevarez. I live in Santa
Fe, New Mexico.
As Director of Community Learning Network, an educational
non-profit dedicated to building stronger communities through
real-life learning, and a member of the Broadband and Digital
Equity Support Team for the New Mexico Office of Broadband, I
have traversed the state, met with hundreds of constituents--
and I'm here today to share community concerns and to highlight
the urgent need for Congress to act now to extend ACP before it
lapses completely.
Though many think the Internet is all about technology, it
is actually about connecting people. A Dine' Navajo elder I
work with who lives on a fixed income on a farm in rural New
Mexico, with the end of ACP and broadband access and
affordability out of reach for many rural residents, she and
many others like her will go without Internet connectivity at
home. And in her case, will do what she has done before to get
online: drive 52 miles to check her e-mail at the public
library.
With the end of ACP, more than 23 million households are
now at risk of losing their Internet connectivity. Nearly half
are military families. And 10 million are over the age of 50,
with seniors reporting that they rely heavily on the Internet
to coordinate and track medical services, overcome isolation,
and deal with the fact that they may no longer be able to
drive. 320,000 are households on tribal lands, where high-speed
Internet is generally more expensive. In New Mexico, more than
184,000 households face losing their ability to pay bills,
purchase goods, check health portals, run small businesses, and
do work or schoolwork online.
In Congressional District 2, 28 percent of all households
are enrolled in ACP, so one of every four households are now at
risk of losing connectivity. This is a terrible blow to the
local economy, and a terrible setback for local families and
the counties where they live. With families facing hard
decisions about what to cut, finding an affordable alternative
is not easy, especially in rural areas where there may only be
one provider, where costs can be much higher, and where low-
cost options may be unreliable or inadequate for whole families
working or learning from home.
As the fifth-largest state and the sixth-lowest in
population density, deploying fiber in New Mexico is extra
costly. Subscriber pools are smaller and more scattered, and
networks are difficult to maintain.
For us in New Mexico, for our economy, for our health, for
the well-being of our families, our communities, and our
Internet service providers, every subscriber counts.
Subscribers are especially critical for our small, tribal, and
rural communities who have leveraged investments and built
networks and companies to provide valuable Internet service in
hard-to-reach areas where they are often the only option.
These local providers often run on tight margins with
higher expenses to serve low-density areas with lower-income
customers. They are at a higher risk of bankruptcy without a
reliable and consistent pool of active subscribers.
Thanks to collaborative investment and ACP outreach, local
networks and providers have been building relationships and
trust while growing their customer base. The end of ACP now,
after just over 2 years of getting going, and the loss of
subscribers, puts the BEAD initiatives in jeopardy and some
local networks at risk of failure, especially in areas that are
most in need and serving some of the hardest-to-reach and
traditionally undeserved, disconnected community members.
We cannot overlook the massive investment and
administrative burden of standing up ACP and coordinating more
than 1,500 Internet service providers and 23 million
subscribers through enrollment. To let ACP die now feels
wasteful and irresponsible. To let it lapse feels short-sighted
and irreverent of both its current success, 23 million
subscribers in just over 2 years, and the massive investment of
time, energy, and money by everyone.
Right now, confusion abounds. Congress is losing
credibility, and local service providers are losing customers
and public trust.
So what now? Are we really going to let 23 million
households drop out of the Internet economy and disappear from
the digital world? Mayors and Governors, both Republicans and
Democrats, have publicly prioritized ACP and made it a part of
their plan to close the digital divide. Affordable, reliable
Internet is more than a bipartisan issue. It is a people issue
with a real-world impact on health and wealth for Americans.
Moreover, it is rare but inspiring when government,
community, and industry align. So why align? As aptly noted by
one of our leaders in the community, broadband is everybody's
business. Broadband is an essential service for everyone.
ACP was established and to address the critical needs to
connect everyone, and 23 million enrollment was a monumental
feat, and a success we should not waste. Meanwhile, ACP use is
widespread and directly impacts our constituents. Urban,
suburban, and rural communities rely on ACP to pay for the
high-speed Internet service they need for school, work, health
care, essential services, and more.
Most importantly, we all lose when ACP ends. The end of ACP
puts networks, local ISPs, and BEAD infrastructure investment
at risk and erodes public trust. Since we just got started,
quitting now would be a waste.
In closing, I echo the understanding that people and places
thrive when everyone can participate. Economies thrive when
everyone can participate.
So I ask everyone in this room, do you use a cell phone,
computer, a laptop? Do you have Internet access right now? As
we face the end of ACP, I would like you to join more than 23
million households in an experiment. Turn off your devices and
go without using Internet for the next 5 minutes, 5 hours, or 5
days. Yes, give it a try while reflecting on how the rest of
your day and life will be impacted.
Let's let this sink in and then let's not let more than 23
million households and families disappear from the digital
economy. Congress has the power to act now to keep those
constituents connected, and I am here to remind you today that
the health and well-being of Americans, as well as the economic
vitality and security of our nation, depend on it.
[The prepared statement of Ms. Nevarez follows:]
Prepared Statement of Jennifer Case Nevarez, Director and Lead
Educator, Community Learning Network (CLN) and Member, Broadband and
Digital Equity Support Team, New Mexico and the Office of Broadband
Access and Expansion (OBAE)
My name is Jennifer Case Nevarez. I live in Santa Fe, New Mexico,
and serve as Director and Lead Educator for an educational nonprofit
called the Community Learning Network (CLN), which is dedicated to
``building stronger communities through real-life learning'' and
grounded in the words of our Dine' (Navajo) co-founder who noted that
``well-being is nourished by being accountable to a people and a
place.'' Over the years, CLN has supported powerful real-life learning
experiences for thousands of community members of all ages and worked
to build resiliency with communities and tribes throughout the state
and nation. As a member of the Broadband and Digital Equity Support
Team for New Mexico and the Office of Broadband Access and Expansion
(OBAE), I have traversed the state, met with hundreds of constituents,
and been deeply involved in stakeholder engagement. I am here today to
speak to broadband affordability, to share community concerns about the
end of the Affordable Connectivity Program (ACP), and to highlight the
need for Congress to take action now to extend ACP before it lapses
completely and permanently.
First, I would like to start with the reminder that many think the
Internet is all about technology, but it is actually about connecting
people. A Dine' (Navajo) elder I worked with lives on fixed income on a
farm in rural New Mexico. With the end of ACP and broadband access and
affordability out of reach for many rural residents, she, and many
others like her, will go without Internet connectivity at home, and in
her case, will do what she has done before to get online . . . drive 52
miles to check her e-mail at the public library (but only once in a
while, since gas is expensive, too).
As of April 30, 2024, just two days ago, more than 23 million
households are now at risk of losing their Internet connectivity with
the end of ACP. Nearly half are military families and 10 million are
over the age of 50 (with Seniors reporting that they rely heavily on
the Internet to coordinate and track medical services and overcome
isolation). 320,000 are households on Tribal lands, where high-speed
Internet is generally more expensive.
In New Mexico, more than 184,000 households enrolled in ACP face
losing their Internet connectivity and their ability to pay bills,
purchase goods, check health portals, access essential services, run
small businesses, and do work or schoolwork online. In Congressional
District 2, 28 percent of all households are enrolled in ACP, which
means 1 out of every 4 households in the District are now at risk of
losing connectivity. This is a terrible blow to the local economy and a
terrible setback for local families and the counties where they live,
already burdened by economic, community development, and infrastructure
challenges and serving large numbers of residents struggling with
higher household, transportation, utility, and healthcare expenses on
fixed or lower incomes. With families facing hard decisions about what
to cut, finding an affordable alternative is not easy, especially in
rural areas where there may only be one provider, where costs can be
much higher, and where low-cost options may be unreliable or inadequate
for families working or learning from home.
As the 5th largest state (with 121, 298 square miles) and the 6th
lowest in population density (with an average density of 17 people per
square mile) (The District of Columbia has the highest population
density with 11,131 people per square mile), deploying fiber is New
Mexico is extra costly, subscriber pools are smaller and more
scattered, and networks are difficult to maintain and sustain due to
lower density, higher cost of deployment and maintenance, and the
financial vulnerability of subscribers.
For us in New Mexico, . . . for our economy, for our health, and
for the well-being of our families, our communities, and our Internet
Service Providers, . . . every subscriber counts.
Subscribers are especially critical for our small tribal and rural
communities who have leveraged investments and built networks and
companies to provide valuable Internet services in hard to reach areas
where they are often the only option. (There are 23 Tribal Nations in
New Mexico and many have started and run their own networks). These
local providers often run on tight margins with higher expenses to
serve low-density areas with lower-income customers. They are at a
higher risk of bankruptcy without a reliable and consistent pool of
active subscribers. Thanks to collaborative federal, state, local, and
non-profit investment in ACP outreach, local networks and providers
have been building relationships and trust while growing their customer
base. Amidst the massive investment in broadband infrastructure
currently underway, the end of ACP now, after just over two years of
getting it going, and the loss of ACP subscribers puts the BEAD
initiatives in jeopardy and some local networks at risk of failure,
especially in areas that are most in need and serving some of the
hardest to reach and traditionally underserved, disconnected community
members.
We cannot overlook the massive investment and administrative burden
of standing up the ACP program and coordinating more than 1500 Internet
Service Providers and 23 million subscribers through the application,
documentation, approval, authorization, and enrollment process. To let
ACP, and the systems in place to manage it, die now, in the wake of
that investment and effort, feels wasteful and irresponsible. To let it
lapse and have to build another system later feels short-sighted and
irreverent of both its current success (23 million subscribers in just
over 2 years) and the massive investment of time, energy, and money in
ACP by everyone . . . including federal, state, and local agencies, as
well as trusted community organizations.
Right now, confusion abounds, and Congress is losing credibility.
Local service providers are losing customers and public trust.
Providers and partners are now also burdened by the additional expense
and effort of alerting ACP subscribers to the changes, navigating
public confusion, and managing service down-grades and terminations.
So what now?
When connectivity is critical for progress and a matter of national
security and economic vitality, are we really going to let ACP end? Are
we really going to let 23 million households potentially drop out of
the Internet economy and disappear from the digital world?
I urge Congress to act now and extend ACP. I urge congress to
consider the creative funding possibilities currently proposed.
Governors from across the country, both Republicans and Democrats, have
publicly prioritized the Affordable Connectivity Program, and made it a
part of their plans to close the digital divide. Affordable, reliable
Internet is more than just a bi-partisan issue. It is a people issue
with real world impacts on health and wealth for Americans. Moreover,
it is rare but inspiring when you have government, community, and
industry aligned. Numerous community and industry partners have stepped
up to voice their concerns, and in January 2024, an initial 174 Mayors
from around the U.S. signed a bipartisan letter calling for legislators
to extend ACP.
Why?
As aptly noted by one of our local community leaders: Broadband is
everybody's business. Broadband is an essential service for everyone
and opens a world of possibilities.
The ACP was established to address the critical need to connect
everyone. 23 million enrollment was a monumental feat and success we
should not waste. Proving eligibility and enrolling was complicated and
time-consuming. Terminating now would be wasteful, the robust
eligibility verification and enrollment work would be lost, and
starting over would demand so much more time, energy, and money.
Meanwhile, ACP use is widespread and directly impacts constituents.
Community members in more than 23 million households across the nation,
including urban, suburban, and rural communities rely on ACP to pay for
the high-speed Internet service they need for school, work, health
care, essential services, and more. As a matter of fact, four of the
seven states with the highest ACP enrollment are represented by members
of the Senate Committee on Commerce, Science and Transportation, to
which this subcommittee reports (Source: USAC, Feb. 2024).
Most importantly, we all lose when ACP ends. Households and
families lose. Students lose. Covered populations including seniors,
veterans, low-income, and rural community members lose. Healthcare
loses. Essential services lose. Local economies lose. Our national
economy loses. Our national standing and global competitiveness loses,
and we put the vitality and security of our Nation at risk. The end of
ACP puts networks, local ISPs, and BEAD infrastructure investments at
risk and erodes public trust. Since, we just got started. Quitting now
would be a waste.
In closing, I echo the understanding that ``People and places
thrive when everyone can participate.'' Economies thrive when everyone
can participate. So, I ask everyone in this room, Do you use a cell
phone, computer or laptop? Do you have Internet access at home? Do you
ever check e-mails from home? . . . correspond with staff or
constituents online? . . . attend a group meeting online? . . . Review
documents or do research online? . . . make payments or check accounts?
. . . Purchase goods, food, or tickets online? . . . Access health
information or make appointments online? The modern world is driving
all of us online.
As we face the potential but untimely and short-sighted end of ACP,
I ask you to join more than 23 million households in an experiment:
turn off your devices and go without using the Internet for the next
five minutes, five hours, and five days. Yes, give it a try while
reflecting on how the rest of your day will be impacted. How will loss
of Internet access affect your professional life and personal life?
What would be different for you without the Internet? Let's let this
sink in for a moment. AND, then acknowledge again that as of April 30,
2024, just two days ago, more than 23 million households are now at
risk of losing their Internet connectivity with the end of ACP.
Let's not let more than 23 million households and families
disappear from the digital economy. Congress has the power to act now
to keep those 23 million households of constituents connected, and I am
here to remind you today, that the health and well-being of Americans,
as well as the economic vitality and security of our nation, depend on
it.
STATEMENT OF KATHRYN de WIT, PROJECT DIRECTOR, BROADBAND ACCESS
INITIATIVE, PEW CHARITABLE TRUSTS
Ms. de Wit. Ranking Member Cruz, Chairman Lujan, and
Ranking Member Thune, as well as members of the Subcommittee,
thank you very much for inviting me to testify in today's
hearing. Also, a very happy birthday to Senator Welch.
My name is Kathryn de Wit, and I am the Project Director
for the Broadband Access Initiative at The Pew Charitable
Trusts. Pew is a non-profit, non-partisan, evidence-based
organization, and for more than 75 years we have used data to
make a difference.
My team works directly with broadband offices from 36
states and territories to help them navigate this unprecedented
moment: the largest Federal investment in affordable broadband
access in our Nation's history. The Affordable Connectivity
Program, also known as ACP, is essential to this work.
Achieving universal broadband requires two things. First
are supply side solutions, steps that reduce the cost of
building networks and delivering service to American homes.
Second are demand-side interventions that reduce the cost of
broadband for consumers, particularly low-income and vulnerable
households.
We tried ``If you build it, they will come,'' but COVID--
but the COVID-19 pandemic demonstrated why that approach will
not get us to the finish line. We witnessed in real time how
tens of millions of Americans struggled--struggled to work,
learn, and access health care because they did not have
reliable or high-quality Internet.
Why? For some, it was too expensive. For others, it was
simply unavailable. Congress took swift action to address this,
including dedicating funding to immediately bring vulnerable
households online, and it worked.
Twenty-three million households participate in the ACP
today, including almost half--and almost half of those families
are military families, and 19 percent are 65 and older. In
Texas alone, 1.7 million households benefit from the program.
In Michigan, more than 410,000 households are enrolled. These
numbers are a remarkable testament to the response from
Internet service providers, the public sector, and community
partners across the country.
Second, Congress established two important deployment
initiatives: the Capital Projects Fund, and the Broadband
Equity Access and Deployment Program, also known as BEAD. But
for the first time, Congress addressed those supply-and-demand
barriers together, by conditioning eligibility for deployment
grants on participation in an affordability program.
In other words, Congress took steps to ensure that $52
billion in taxpayer funds would support networks that would be
available and affordable to consumers, whether they were rural,
veterans, or aging Americans living on a fixed income. ACP is
currently the best tool we have to bridge the digital divide,
because it alleviates cost burden on households and increases
certainty for the providers that we need to connect every
American. In fact, all 50 states have incorporated ACP into
their deployment strategies for capital projects and BEAD.
States are actively administering these programs right now.
But ACP's potential end is introducing risk to states,
providers, and consumers at a critical moment in
implementation.
We all know that broadband is complicated. States have
expressed concerns about a range of challenges, from permitting
to workforce shortages. But for more than a year, state
broadband offices have raised alarms about the end of ACP, and
providers of all types have expressed hesitation about
participating in BEAD if ACP goes away.
That is why we ask Congress to act quickly and decisively
to keep ACP funded. Ohio's digital equity plan notes that the
end of ACP will abruptly disrupt access to affordable Internet
that low-income Ohioans rely on for education, work, and health
care.
That concern is echoed by other program recipients. A
recent survey found that 68 percent of enrolled military
families were concerned about missing out on job opportunities.
Seventy-two percent of enrolled Americans over 65 are worried
about losing access to health care. Ninety-five percent of all
participants said they would struggle with other household
costs, including groceries, utilities, housing, and health
care.
ACP should be improved to better reach the households that
need it and ensure that taxpayers are being protected from
waste, fraud, and abuse. We must extend ACP at the next
legislative opportunity if we want $52 billion in taxpayer
money to support broadband that Americans can use for access to
education, health care, job opportunities, and more.
There is no time to waste. Thank you.
[The prepared statement of Ms. de Wit follows:]
Prepared Statement of Kathryn de Wit, Project Director, Broadband
Access Initiative, The Pew Charitable Trusts
Chairwoman Cantwell, Ranking Member Cruz, Chairman Lujan, Ranking
Member Thune, and other members of the Subcommittee on Communications,
Media, and Broadband, thank you for inviting me to testify in today's
hearing, ``The Future of Broadband Affordability.'' My name is Kathryn
de Wit, and I am the project director for the broadband access
initiative at The Pew Charitable Trusts.
Pew is a nonprofit, nonpartisan, evidence-based organization. For
more than 75 years, we have used data to make a difference--addressing
the challenges of a changing world by illuminating issues, creating
common ground, and advancing ambitious policies that lead to tangible
progress. Pew's broadband access initiative was established in 2017,
and we partner with state and Federal policymakers, researchers,
industry, community organizations, and other stakeholders from across
the broadband landscape to accelerate the Nation's progress toward
universal, affordable high-speed Internet service. In addition to
providing research, informing state and Federal policy, and educating
stakeholders, my team is working directly with the broadband offices
from 36 states and territories to help them navigate this unprecedented
moment: the largest Federal investment in affordable broadband access
in our Nation's history.
These investments may finally put affordable, high-speed Internet
within reach of every American in this country. Research is clear that
achieving universal access requires interventions to address the high
capital costs of deployment and the long-term cost of network
operations, and the cost of broadband for low-income households, aging
Americans living on a fixed income, veterans, and others. Closing the
digital divide requires addressing these supply and demand side
barriers simultaneously, thus decreasing risk for private sector
investment and increasing consumer confidence in the service. The
Affordable Connectivity Program (ACP) is the best tool we have to make
broadband more accessible and affordable to all Americans. A lapse in
funding would harm the 23 million households currently enrolled in the
program and threaten the Federal deployment programs currently underway
that will connect millions more unserved households and businesses. I
implore Congress to act quickly and identify a short-term funding
solution to save the ACP.
I am grateful for the opportunity to share insights and learnings
from our years of work on affordable broadband access, including state
broadband programs. Like others, including private sector Internet
service providers, we have concluded that millions of people across the
country still lack sufficient access to broadband service, largely
because they live in rural communities, which are the most difficult
and expensive to serve. The challenges of deploying broadband network
infrastructure in rural locations, particularly those with low
population density and difficult terrain, create high costs and low
returns on investment that discourage providers from expanding into
those areas. Moreover, broadband deployment in the U.S. has been
market-driven, with private-sector telephone and cable companies
investing in infrastructure in areas that provide higher rates of
return. This means, as rational economic actors, private Internet
service providers (ISPs) tend to focus on areas with denser and higher-
income populations.
In addition to the economic challenges associated with broadband in
rural areas, the cost of broadband negatively impacts the demand for
broadband by low-income Americans. Last year, Pew Research Center found
that, despite 87 percent of U.S. adults with annual household incomes
of $30,000 or less saying they used the internet, just 57 percent of
that same cohort had broadband at home. Comparatively, 98 percent of
U.S. adults with annual household incomes of over $70,000 use the
internet, 88 percent of which report having broadband at home. Further,
although the research center found differences in broadband adoption by
gender, race and ethnicity, and community type (urban, suburban, and
rural), income is the only category for which this difference is
statistically significant. Pew Research Center also found that 45
percent of U.S. adults cite the high monthly cost of a connection as
the reason they do not have broadband, and researchers at the R Street
Institute have argued increased availability of service does not
necessarily result in increased adoption. Price matters.
Given the influence of cost on customer demand and the high capital
costs of deploying broadband, internet service providers have little
reason to upgrade existing networks or build new ones in low-income
areas. That investment decision may also impact customers who can pay
full price for a subscription. Although public funds such as loans or
grants can help offset the cost of capital expenses, ISPs require
additional funding to keep these high-cost communities online.
Additionally, the prevailing argument for lack of expansion has
been that most non-adopters do not perceive the Internet to be
``relevant'' to their lives and therefore will not purchase service.
Yet the data shows us that broadband is still too expensive for
households, even though they report it being relevant to their lives.
Broadband Affordability and Deployment Investment Go Hand-in-Hand
Many combine the two challenges of making broadband more affordable
for all consumers and cost as a barrier to adoption for low-income
Americans into one conversation about broadband affordability. However,
we conclude that these issues require different policy interventions.
Addressing affordability for all broadband consumers requires
supply-side solutions--steps that reduce the cost of building networks
and delivering service to American homes. It also requires more
transparency to help customers understand the cost of the service they
are purchasing. But these will not fully address the challenge of
affordability as a barrier to adoption for low-income households. Doing
so requires demand-side policy interventions that remove cost as a
barrier, such as policies and programs that help cover the cost of both
connections and devices, as well as efforts to help connect households
with those programs.
Those realities are reflected in a series of programs Congress
authorized in response to the COVID-19 pandemic and ongoing efforts to
invest in our Nation's infrastructure: the American Rescue Plan Act's
Capital Project Fund (CPF), the Investment Infrastructure and Jobs
Act's (IIJA), and the Broadband Equity Access and Deployment (BEAD)
program. Specifically, these programs are designed to defray the
capital costs of deployment to higher-cost areas like rural and low-
income communities. However, unlike past grant programs, recipients
must participate in a subsidy program targeted at vulnerable
populations that may be unable to pay for regular service, including
low-income households, veterans, and Pell Grant recipients. This
requirement should expand the customer base for Internet service
providers by increasing the number of customers who can afford and
maintain subscriptions and decreasing turnover of those customers,
defraying the cost for ISPs. The Affordable Connectivity Program
currently helps ISPs meet this requirement.
High Enrollment and Support for the ACP
The ACP has been a success, demonstrating high rates of enrollment,
a positive effect on individuals and networks, and assumed impact on
the Nation's GDP. More than 23 million households are currently
enrolled, far exceeding participation in programs like Lifeline. Of
these participating households, approximately half are Americans over
50 and military families or veterans. Enrollment is high across states.
For example, 58 percent of eligible Ohioans are enrolled as are 48
percent of Wisconsinites, 52 percent of eligible North Carolinians, and
41 percent of Texans. Even in states with lower enrollment, South
Dakota (19 percent) and Montana (29 percent), still had significantly
higher participation in this program than they do in Lifeline, which is
around 2 percent in each state. Data also show that ACP spending almost
equally benefits districts represented by Republicans and Democrats.
What's more, 62 percent of Republican, 78 percent of Independent, and
96 percent of Democratic voters all support continuing ACP, according
to the Digital Progress Institute.
In a November 2023 letter, a bipartisan group of 26 governors
including: Arizona Governor Katie Hobbs (D), Colorado Governor Jared
Polis (D), Illinois Governor J.B. Pritzker (D), Kansas Governor Laura
Kelly (D), Massachusetts Governor Maura Healey (D), Michigan Governor
Gretchen Whitmer (D), North Carolina Governor Roy Cooper (D), New
Mexico Governor Michelle Lujan Grisham (D), Nevada Governor Joe
Lombardo (R), Vermont Governor Phil Scott (R), Wisconsin Governor Tony
Evers (D), and, Wyoming Governor Mark Gordon (R), among several others,
implored Congress to preserve ACP. Additionally, Mississippi Governor
Tate Reeves (R), Missouri Governor Mike Parson (R), Ohio Governor Mike
DeWine(R), Tennessee Governor Bill Lee (R), and Texas Governor Greg
Abbott (R), among others, have individually voiced their support for
the importance of ACP and the continuation of the program.
A recent survey of participants from the Benenson Strategy Group in
collaboration with Comcast allows me to add further clarification on
who benefits from ACP:
49 percent of participating households are military
families.
19 percent of participating households are 65 and older.
26 percent live in rural areas.
47 percent are white, 23 percent are Black, 23 percent are
Latino, and 8 percent are Asian American Pacific Islander.
41 percent live in the South, from Texas to Virginia.
Researchers also asked the surveyed population how losing ACP could
affect their lives and livelihoods. Reponses included:
77 percent of military families and 73 percent of Americans
65 and older said they were concerned about losing contact with
their communities and loved ones.
67 percent of rural residents were worried about losing
their jobs or primary source of income and 68 percent of
military families were concerned about missing out on job
opportunities.
95 percent of surveyed participants said they would struggle
with other household costs, including groceries, utilities,
housing, and health care.
Recent research from Cox Communications found that newly connected
residents in rural communities felt broadband service ``has improved
their lives,'' with 70 percent of those under 30 surveyed reporting
they are ``more likely to remain in their communities when there's a
high-speed Internet connection at home.'' This sentiment is echoed by
many organizations that represent the interest of rural communities and
agricultural producers--from the Farm Bureau to Land `O Lakes to the
U.S. Soybean Association--note the critical relationship between
affordable broadband and rural prosperity.
As former FCC Chair Michael O'Rielly noted in a February 2023 op-ed
in The Hill, ``there is bi-partisan agreement that access to broadband
can be a key tool for citizen self-sufficiency and upward social
mobility,'' leading to greater access to services such as education and
training that could ultimately lower participation in other social
welfare programs. This is supported by research from other research
institutions, such as the American Consumer Institute, that note the
higher earning potential associated with digital skills. George Zuo, an
economist at the University of Maryland, found that recipients of
Comcast's Internet Essentials benefits--a subsidy program similar to
ACP--had higher rates of employment and earnings, as well as decreased
probability for unemployment. John Horrigan, publishing Pew-supported
research at The Benton Institute, applied Zuo's methodology to ACP,
concluding, ``every dollar of ACP subsidy returns nearly two dollars in
impacts to those using the program.''
Similarly, Sprintson and Oughton concluded that ACP could have a
greater effect on the economy than BEAD, specifically due to the
downstream effects on sectors such as retail, health care, and social
assistance, which are ``more reliant on broadband as a production
input.''
The rapid growth of ACP is attributable to several factors,
including the participation of ISPs across the country. Research has
reinforced this, concluding that adoption has steadily increased since
2020, due to both the increased availability of wired connections and
pandemic relief efforts. This is observable in states such as Kentucky,
New Mexico, and Ohio, where broadband access has steadily improved over
the lifespan of ACP. All three states also exhibit high participation
in ACP. In fact, a study on a public-private partnership between the
Housing Authority of the City of Los Angeles (HACLA) and an Internet
service provider, concluded that sufficient speeds and limited
enrollment barriers can induce low-income customers to stay online
after free service runs out. In this case, 2,071 residents--more than
half of the residents in the 10 HACLA communities in the study--paid
$15 per month for service. Although ACP recipients pay a median of $40
a month after the benefit is applied, positive trends in adoption and
retention paired with increasing speeds are important lessons to
consider for future policy efforts, including BEAD, CPF, and the ACP.
Room for Improvement--ACP Reforms
Even with this success, there is room for improvement. An audit of
the ACP released in January 2024 found that the program could benefit
from several changes, such as setting specific programmatic targets.
Other recommendations centered on improving the oversight of the
program through activities such as publishing reports on ISP compliance
and enhancing quality controls for verifying eligibility of consumer
applications and ISP claims.
Pew agrees that the ACP would benefit from such changes, adding
needed transparency to this program. Additionally, it would enable
policymakers, researchers, and other stakeholders to understand ACP's
effect on consumer behavior and ISP market dynamics. Examples of
improving program oversight include tracking new subscribers,
subscriber retention over time, and customers using ACP to upgrade
service. Policymakers at every level of government are increasingly
interested in understanding how consumers benefit from these subsidies.
As such, Congress could direct the FCC, in partnership with other
agencies, to establish a framework to analyze the immediate and long-
term effects of ACP or a similar subsidy program on factors of social
vulnerability and economic opportunity. Another analysis could focus on
how programs focused on low-income households can save money through
the provision of digital services.
Studying ACP, particularly paired with upcoming BEAD and the
Digital Equity Act programs, will enable lawmakers to continue refining
program requirements and estimating cost over time.
Life Without the ACP--Threat to Federal Broadband Deployment Efforts
ACP's lapse will call these gains into question. Failure to fund
the program would undercut the success of other significant Federal
programs, including the $14.2 billion previously spent on ACP and $66
million in outreach grants to nonprofits, state, and local government,
and other entities to establish trust in the program and encourage
signups. Not to mention the approximately $52 billion committed to CPF
and BEAD, where providers of different sizes, service delivery, and
technologies have expressed hesitation about participating in those
programs if ACP goes away. These numbers do not account for the
investments in marketing and outreach from nonprofit organizations and
for-profit companies inside and outside the telecommunications
community. In fact, more than 400 organizations, representing a range
of political, social, and industry interests, called on Congress to
fund the ACP.
All 56 states and territories have incorporated ACP or a similar
success program into their deployment strategies for BEAD and their
plans for Digital Equity Act funding. In their BEAD Initial Proposal
Volume II, every state has proposed how an awarded provider would make
a low-cost service option available to ACP eligible households. The
National Telecommunications and Information Administration (NTIA) is
actively reviewing these proposals, but as of April 30, 2024, four
states are approved to move forward. These states--Kansas, Louisiana,
Nevada, and West Virginia--all designed their low-cost service options
to be between $30--$65 to ensure ACP eligible households can afford
service on a BEAD-funded network. Not only is the ACP subsidy critical
to the success of BEAD, but states are also relying on the
administrative infrastructure of the National Verifier to determine
which households are eligible for a low-cost service option.
Further, nearly every state detailed in their statewide digital
equity plans how they planned to leverage ACP and utilize their Digital
Equity State Capacity Grant allocation to promote enrollment. In Texas,
the broadband office planned to utilize these funds to ``increase the
percentage of Texans who are aware of the Affordable Connectivity
Program.'' Similarly, in Ohio, the broadband office planned to
``support ACP outreach and enrollment and other affordability efforts
statewide'' by leveraging regional networks to increase ACP awareness
and convene the recipients of FCC ACP Outreach grants to share best
practices. The Ohio plan directly notes that, ``ACP has helped more
than 1 million Ohioan households sign up for and maintain a home
Internet subscription by offering a $30 monthly subsidy. Unfortunately,
the program's funding is projected to run out by the spring of 2024.
This would, in turn, abruptly disrupt access to affordable Internet
that low-income Ohioans rely on for education, work, and healthcare.''
ACP's dissolution is adding risk to these programs at a critical
moment in project planning for state policymakers and private sector
partners. Twenty-six states have launched their challenge processes to
determine which areas will be eligible for BEAD and are preparing to
begin the subgrantee selection process. As providers across the country
have noted, the existence of ACP will factor into their decision to
participate in the program.
Conclusion
Ambitious goals--such as connecting every American to high-speed,
affordable internet--require a combination of public and private sector
partners working together. The central responsibility in the public
sector is the providing of secure and reliable funding. With millions
of people lacking access to a service that has become essential for
quality of life and economic well-being, there is no time to waste. Pew
asks that Congress act swiftly to ensure the future of ACP and
prioritize long-term policies that promote access to high-speed
affordable Internet for all Americans.
Senator Lujan. Thank you, Ms. de Wit.
Mr. Levin, you're recognized for your opening statement.
STATEMENT OF BLAIR LEVIN, POLICY ADVISOR, NEW STREET RESEARCH;
NONRESIDENT SENIOR FELLOW, BROOKINGS METRO
Mr. Levin. Thank you very much, Chair Lujan, Ranking Member
Thune, Senator Welch, and other members of the Subcommittee,
thank you for inviting me to today's hearing. My name is Blair
Levin. I'm an equity analyst with New Street Research and a
nonresident fellow at Brookings, but I'm speaking solely for
myself.
Today, I'd like to explain why ACP should be extended and
then, as part of a larger Universal Service Fund reform, be
maintained with whatever modifications Congress deems wise.
First, the cost of digital exclusion is already large and
growing, with AI certain to magnify those costs. In 2010, the
National Broadband Plan documented how the cost of digital
exclusion was large and growing. In March 2020, the United
States, in an overwhelmingly bipartisan manner, saw that cost,
and agreed it was unacceptable. The pandemic has largely ended,
but the shift to online delivery of essential services and the
need for connectivity to participate in the economy has not;
and the coming wave of AI will magnify those costs.
Second, despite that knowledge, our country is about to
take the greatest step backward any country has ever taken to
widen, not close, the digital divide.
Third, the cost of that disconnection will be
extraordinarily painful to individuals and families. My fellow
witnesses have already testified to how ACP recipients would be
harmed by the program's demise. I will not repeat their
powerful testimony. Instead, I will focus on the cost to all of
us.
And that leads me to the fourth point. Digital
disconnection will impose an immediate cost on our economy,
shrinking economic growth. My written testimony cites studies
demonstrating how the program increases earnings for low-income
households and increases GDP. It is no surprise, therefore,
that business groups overwhelmingly support the extension.
Fifth, the loss of the ACP will raise the cost of
government-provided health care and worsen health care
options--outcomes. Numerous studies demonstrate that telehealth
can lower costs and improve outcomes in many circumstances
including cancer, maternal mortality, opioid treatment, and
emergency room visits. ACP opens the door to improving health
care outcomes while lowering costs for Medicaid, Medicare, and
the VA. Alternatively, the end of ACP is likely to cause
increased health care costs and worse health outcomes. Why
would we want to do that?
Sixth, the loss of ACP will raise the cost of government
and diminish its performance in other areas as well. The story
of broadband and health care is repeated in other areas where
government is the key investor, including job training, job
placement, education, and other social services.
This is not surprising. Broadband is a general-purpose
technology. It enables innovations and efficiencies in multiple
areas. In 2013, Google's chief economist estimated that the
Internet already generated $500 in consumer surplus per user
annually, citing multiple different kinds of savings.
And it logically follows that because many low-income
households are so dependent on government programs, the
consumer surplus that ACP recipients obtain also creates a
surplus for those--for the government through those programs.
So again, why would we want our investments to be less
effective and more expensive?
Seventh, the loss of ACP will particularly hurt rural areas
and military families. As others have noted, rural areas in
particular benefit from ACP. I cite several in my written
testimony.
Let me illustrate with one more: rural areas are suffering
from a growing epidemic of hospital closures, and that makes
telehealth even more essential.
As Ms. de Wit noted, losing ACP would reduce the value of
BEAD deployment dollars, meaning that communities that could
have been connected to fiber will end up connected with fixed
wireless or even satellites.
Eighth, every negative consequence I've mentioned will be
made worse as AI becomes embedded in our economy and society.
Ninth, the administrative cost of shutting down and
starting up again is high. It would be a huge waste to shut ACP
down and incur, as we would inevitably do, the startup costs
again.
In sum, losing ACP will result in slower economic growth,
increases in the cost of health care, education, job training
and placement, and other social services, while decreasing the
effectiveness of those services.
I know I'm a Democratic witness, but let me just close by
endorsing the letter 20 House Republicans sent Speaker Johnson
asking for action on ACP, saying, ``Bipartisan solutions are
within reach to ensure uninterrupted access to the ACP, while
concurrently pursuing long-term funding strategies.''
I completely agree. Let's adopt a clean extension, and then
reform the entire Universal Service Fund to put it and ACP on a
sustainable basis. Thank you.
[The prepared statement of Mr. Levin follows:]
Prepared Statement of Blair Levin, Policy Analyst, New Street Research
Chairwoman Cantwell, Ranking Member Cruz, Chair Lujan, Ranking
Member Thune, and other members of the Subcommittee on Communications,
Media, and Broadband, thank you for inviting me to testify in today's
hearing, ``The Future of Broadband Affordability.''
My name is Blair Levin. I am the policy analyst with New Street
Research, an equity research firm, a Senior Non-Residential Fellow at
the Metropolitan Policy Project of the Brookings Institution. In 2009-
2010 I led the team that wrote the United States National Broadband
Plan. From 1993-1997 I served as Chief of Staff to FCC Chairman Reed
Hundt. I am here speaking on behalf of myself, and my views are not
intended to represent the views of any organization with which I am
affiliated.
Today, I would like to explain why the ACP should be extended and
then, as part of a larger Universal Service Fund reform effort, be
maintained with whatever modifications Congress deems wise.
First, the cost of digital exclusion is already large and growing, with
Artificial Intelligence (AI) certain to magnify the cost.
In 2010, the National Broadband Plan documented how the cost of
digital exclusion was large and growing. In March of 2020, the United
States, in an overwhelming bi-partisan manner saw and understood that
cost and agreed that the cost was unacceptable. In 2021, Congress found
that ``Access to affordable, reliable, high-speed broadband is
essential to full participation in modern life in the United States;''
and that ``(t)he persistent `digital divide' in the United States is a
barrier to the economic competitiveness of the United States and
equitable distribution of essential public services, including health
care and education.'' It then funded programs to close that divide.
The pandemic has largely ended but the shift to online delivery of
essential services and need for connectivity to participate in the
economy has not. And it will likely accelerate again. AI will not be as
dramatic an evangelist for universal broadband as was COVID. It will
not make the case in a single March weekend. Nonetheless, in the last
part of this decade, we are going to discover that the cost of digital
exclusion will be even greater than it was during COVID, as Artificial
Intelligence magnifies those barriers and costs.\1\
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\1\ As Bill Gates noted in his 2024 letter, ``we are 18-24 months
away from significant levels of AI use by the general population.''
https://www.gatesnotes.com/The-Year-Ahead-2024
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In short, we already know the cost of disconnection is unacceptable
and the cost will inevitably get much worse.
Second, despite that knowledge, our country is about to take the
greatest step backwards any country has ever taken to widen,
not close, the digital divide.
You all know the reason. Early this month, the Affordable
Connectivity Program (ACP), which provides a monthly subsidy sufficient
to purchase broadband for over 23 million households, nearly 60 million
people, will run out of funds.
We can't know how many persons will be disconnected as a result.
But we do know 53 percent rural survey respondents and 47 percent
of all respondents reported having either zero Internet connectivity or
relying solely on mobile Internet service prior to receiving their ACP
benefit.\2\ Nearly 70 percent of survey respondents reported they had
inconsistent connectivity or zero connectivity at all before ACP.\3\
More than three-quarters of respondents say losing their ACP benefit
would disrupt their service by making them change their plan or drop
Internet service entirely.\4\
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\2\ https://www.fcc.gov/sites/default/files/Measuring-Impact-ACP-
Survey-Fact-Sheet.pdf
\3\ https://www.fcc.gov/sites/default/files/Measuring-Impact-ACP-
Survey-Fact-Sheet.pdf
\4\ https://www.fcc.gov/sites/default/files/Measuring-Impact-ACP-
Survey-Fact-Sheet.pdf
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So, the number of Americans disconnected from a permanent broadband
connection if ACP disappears is likely to number in the tens of
millions.
Third, the cost of that disconnection will be extraordinarily painful
to individuals and families.
A recent study\5\ showed that
---------------------------------------------------------------------------
\5\ https://www.bsgco.com/acp-fact-sheet
65 percent of ACP participants fear that losing broadband
would result in losing their job or their household's primary
---------------------------------------------------------------------------
source of income;
75 percent fear losing access to health care; and
81 percent of ACP parents worry about their children falling
behind in school.
I would hope that we could agree that government should act to
alleviate, not exacerbate, such fears.
Fourth, that is not the only cost. Digital disconnection will also
impose an immediate cost on our economy, shrinking economic
growth.
A 2021 study showed that in areas where discount Internet plans
were available, there was a positive impact on employment rates and
earnings of eligible households. With greater labor force participation
and decreased probability of unemployment, low-income households saw a
$2,200 annual earning boost from subsidized Internet programs. As the
study showed increased broadband affordability for low-income people
leads to ``increased employment rates and earnings of eligible
individuals, driven by greater labor force participation and decreased
probability of unemployment''--providing further savings to government
unemployment insurance programs.\6\
---------------------------------------------------------------------------
\6\ https://www.aeaweb.org/articles?id=10.1257/pol.20190648
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Another study found that ``every dollar of ACP subsidy returns
nearly two dollars in impacts to those using the program'' due to
``employment effects that boost household income; and convenience
effects, e.g., time saved from shopping online as well as having access
to a greater variety (or quality) of goods.'' \7\
---------------------------------------------------------------------------
\7\ https://www.benton.org/publications/affordable-connectivity-
program-benefits-outweigh-costs
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Further, a recent economics working paper estimated that for every
dollar spent on the ACP, the Nation's GDP increases by $3.89--nearly
twice the multiplier of the far larger Broadband Equity Access and
Deployment (BEAD) Program, which builds new digital infrastructure in
unserved locations.\8\
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\8\ https://arxiv.org/ftp/arxiv/papers/2311/2311.02431.pdf
---------------------------------------------------------------------------
Thus, it is no surprise that business groups overwhelmingly support
the extension. Not only is an ACP extension endorsed by enterprises in
the communications market but also by Chambers of Commerce across the
country.
Fifth, and too often ignored, the loss of the ACP program will raise
the cost of government provided health care services and
diminish health care outcomes.
It should not be surprising that as a 2021 medical paper found that
``Digital literacies and Internet connectivity have been called the
`super social determinants of health' because they address all other
social determinants of health (SDOH). For example, applications for
employment, housing, and other assistance programs, each of which
influences an individual's health, are increasingly, and sometimes
exclusively, accessible online. The costs of equipping a person to use
the Internet are substantially lower than treating health conditions
and the benefits are persistent and significant, making the efforts to
improve digital literacy skills and access valuable tools to reduce
disparities.'' \9\
---------------------------------------------------------------------------
\9\ https://www.nature.com/articles/s41746-021-00413-8
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But it is not just good for the patient; it is also good for the
patient's insurance company. As the largest health care insurer, the
Federal government should want to take advantage of savings such as
those seen in a recent study\10\ finding the cost savings of using
telehealth for patients with cancer ranged from $147 to $186 per visit,
or the University of Pennsylvania study\11\ showing that telemedicine
was 23 percent less expensive than in-person visits. Similarly, a 2023
study\12\ by the Department of Veterans Affairs found that ``veterans
who utilized a new tele-emergency service were nearly half as likely to
visit an emergency department in-person and showed reduced short-term
Veteran visits to emergency departments outside of VA.''
---------------------------------------------------------------------------
\10\ https://jamanetwork.com/journals/ jamanetworkopen/fullarticle/
2800164
\11\ https://www.pennmedicine.org/news/news-releases/2023/june/
employee-telemed-visits-25-percent-less-costly-for-health-system
\12\ https://www.va.gov/ann-arbor-health-care/stories/new-research-
telehealth-emergency-care-
leads-to-decreased-emergency-department-visits-hospitalizations-
reduced-health/#: :text=Health
%20Care%20Costs-
,New%20Research:%20Telehealth%20Emergency%20Care%20Leads%20to%20
Decreased%20Emergency%20Department,Hospitalizations%2C%20Reduced%20Healt
h%20Care
%20Costs
---------------------------------------------------------------------------
Another area where telehealth can improve both costs and outcomes
is with maternal mortality rates. The United States has alarming trend
lines in this arena, with an increase of 60 percent in maternal
mortality between 2019 and 2021.\13\ At the behest of Congress, the
Federal Communications Commission mapped where maternal mortality is
highest--and the maps of places where new mothers die at the highest
rates look a lot like maps of where household Internet subscription
rates are low.\14\
---------------------------------------------------------------------------
\13\ https://healthcare.rti.org/insights/digital-health-maternal-
outcomes
\14\ https://www.fcc.gov/reports-research/maps/connect2health/
maternal-health-map.html?bb
Sel=Broadband+Access&mhSel=Maternal+Deaths&bbThresh=90.25&mhThresh=1&md=
2
---------------------------------------------------------------------------
Of course, there are many factors that influence maternal
mortality, but it is worth noting that there are promising ways to
address maternal mortality that rely on home broadband for new mothers.
In Louisiana, Ochsner Health has had success in using digital tools to
monitor at-home blood pressure and other risk factors for pregnant
women, resulting in fewer hospital admissions and caesarean section
procedures. Such remote maternity online monitoring has reduced
unexpected neonatal intensive-care unit admissions by 27 percent.\15\
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\15\ https://www.ama-assn.org/practice-management/digital/how-
digitally-enabled-care-can-improve-postpartum-outcomes
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The healthcare benefits of using digital tools extend beyond
maternal mortality. Telehealth is associated with people maintaining
their participation in opioid treatment programs\16\ and telehealth can
reduce the cost of healthcare service delivery with only marginal
increases in in-person visits.\17\ Given the amount the United States
spends on Medicare and Medicaid, universal, sustainable broadband
should be seen as a huge opportunity to improve health outcomes while
lowering costs.
---------------------------------------------------------------------------
\16\ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/
2810828
\17\ https://www.ajmc.com/view/economics-of-a-health-system-s-
direct-to-consumer-telemedicine-for-its-employees
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In short, the end of ACP is likely to cause increased health care
costs and worse health outcomes. Why would we want to do that?
Sixth, the loss of the ACP program will raise the cost of government
and diminish its performance in other areas as well.
One such area is job training. As noted above, access to broadband
leads to ``greater labor force participation and decreased probability
of unemployment'' in part because connections enable access to online
job training courses that can be tailored to an individual's
background, geography, and ambitions. This reduces the costs of our
unemployment system.
A similar story involves job placement. In 2016, the Dallas Fed
found that already 60-70 percent of job opportunities were posted
online.\18\ By now that number has no doubt increased. So, if we want
to reduce the financial costs of our unemployment system, we need
everyone online.
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\18\ https://www.dallasfed.org/-/media/Documents/cd/pubs/
digitaldivide.pdf
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Education offers a similar picture. Students without home Internet
access have lower grades, complete homework less often and are less
likely to attend college. They score about three points lower on a 64-
point digital skills scale compared to those with home internet. There
is also a significant ``homework gap'' with 64 percent of students with
no home Internet often leaving homework unfinished, compared to 17
percent with home access.\19\
---------------------------------------------------------------------------
\19\ https://www.pewtrusts.org/en/research-and-analysis/articles/
2020/12/08/what-covid-19-underscores-about-how-broadband-connectivity-
affects-educational-attainment
---------------------------------------------------------------------------
The same story--reduced costs and improved performance--can be
found for other social services. ACP creates benefits for social
service suppliers. Greater certainty in at-home service for clients
makes it more attractive to invest in solutions in health care and job
training. The ACP is helping to create and is now part of an emerging
innovation system where the value of investing in social solutions is
greater due, in part, to more consistent connectivity for low-income
people. The ACP has brought stability to the last mile of service
delivery for these new solutions.
Seventh, the loss of the ACP program will particularly hurt rural
areas and military families.
As a starting point, nearly half (49 percent) of rural households
qualify for ACP compared with 40 percent of non-rural households. This
gap largely results from more lower income households in rural parts of
the country. Some 36 percent of rural households have annual incomes at
or below 200 percent of the Federal poverty level compared to 28
percent for households in non-rural areas.\20\
---------------------------------------------------------------------------
\20\ https://www.benton.org/blog/affordable-connectivity-program-
and-rural-america#: :text=
15%25%20of%20all%20rural%20households,have%20enrolled%20in%20the%20benef
it
---------------------------------------------------------------------------
Further, as noted above, more rural than non-rural residents
reported having either zero Internet connectivity or relying solely on
mobile Internet service prior to receiving their ACP benefit.\21\
---------------------------------------------------------------------------
\21\ https://www.fcc.gov/sites/default/files/ Measuring-Impact-ACP-
Survey-Fact-Sheet.pdf
---------------------------------------------------------------------------
The statistics I cited earlier on the benefits of telehealth are
even more important to rural areas, as they are suffering from an
epidemic of hospital closures, an epidemic that is likely to get much
worse, making telehealth even more essential.\22\
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\22\ https://www.beckershospitalreview.com/finance/states-with-the-
most-rural-hospital-closures.html
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But the biggest problem may be the impact of losing ACP on BEAD and
rural broadband deployment. As the consulting group BCG found, ACP
reduces the subsidy needed to incentivize providers to build in rural
areas by 25 percent per household, writing ``the existence of ACP,
which subsidizes subscriber service fees up to $360 per year, reduces
the per-household subsidy required to incentive ISP investment by $500,
generating benefit for the government and increasing the market
attractiveness for new entrants and incumbent providers.'' \23\
---------------------------------------------------------------------------
\23\ https://www.commonsensemedia.org/sites/default/files/research/
report/2022-cs-bcg-closing-digital-divide_final-release-3-for-web.pdf
---------------------------------------------------------------------------
But of course, if ACP goes away, those savings will also go away
and to put a fine point on it, it is a mathematical certainty that
there will be communities in, for example, Texas that instead of
getting fiber will end up with fixed wireless or even satellite.
As to military families, according to a White House study, they
make up nearly half of the households that benefit from ACP.\24\ The
ACP provides veterans a cost-effective way to access Department of
Veterans Affairs services, such as telemedicine, job training, and VA
benefits.
---------------------------------------------------------------------------
\24\ https://www.whitehouse.gov/briefing-room/statements-releases/
2024/02/06/fact-sheet-as-affordable-connectivity-program-hits-
milestone-of-providing-affordable-high-speed-internet-to-23-million-
households-nationwide-biden-harris-administration-calls-on-congress-t/
---------------------------------------------------------------------------
Eighth, every negative consequence that I have mentioned will be made
worse, as AI becomes embedded in our economy and society.
I have no doubt that later this decade we will view the
implications of AI similarly to how we saw the implications of Covid in
how both vividly demonstrate the unacceptability of digital exclusion.
Whether we are discussing the skill sets needed, the jobs we need
to fill, education\25\ and health care\26\ trends in artificial
intelligence will exacerbate the negative consequences of any remaining
digital divide. And those consequences in turn will make the United
States less competitive as AI defines the new parameters of
competition.
---------------------------------------------------------------------------
\25\ https://www.govtech.com/education/will-ai-in-schools-widen-
the-digital-divide?utm_source=
sendgrid&utm_medium=e-mail&utm_campaign=Newsletters
\26\ https://a16z.com/how-to-democratize-healthcare-ai-gives-
everyone-the-very-best-doctor/
---------------------------------------------------------------------------
But I would urge you to consider not just the downside but also the
upside in terms of the problems we can address if we have both
universal adoption and artificial intelligence.
For example, our young people remain behind in reading, a deficit
that if not corrected, will cost our country billions in years to come
due to such things as lost economic productivity\27\ and increases in
crime.\28\ Recent data demonstrates that just 32 percent of fourth
graders read at or above a fourth-grade level.\29\
---------------------------------------------------------------------------
\27\ A 2020 study evaluating literacy and numeracy in OECD
countries found that many adults with low literacy can find jobs, but
that higher literacy and skill levels give workers more opportunities
for career and income growth. Cherry, G., & Vignoles, A. (2020). What
is the economic value of literacy and numeracy? IZA World of Labor 229
https://doi.org/10.15185/izawol.229.v2 Similarly, Research indicates
that education quality--measured by test scores in international
student surveys--predicts economic growth. https://www.tandfonline.com/
doi/full/10.1080/13504851.2023.2168604. For example, the study cited
above concludes ``test scores appear to be a good measure of both
cognitive and non-cognitive skills of importance for growth.''
\28\ The data is clear that there is ``a strong connection between
early low literacy skills and our country's exploding incarceration
rates.'' https://www.literacymidsouth.org/news/the-relationship-
between-incarceration-and-low-literacy.
\29\ In 2022, the percentage of fourth-grade public school students
performing at or above the NAEP Proficient level in reading was 32
percent nationally. https://www.nationsreport
card.gov/reading/states/achievement/?grade=4.
---------------------------------------------------------------------------
We can, and we must, fix that. With the tools of technology,
particularly AI,\30\ we should make sure no future generations fall
behind.\31\ As Bill Gates noted in his most recent letter, AI can bring
personalized tutors to every student. ``The AI education tools being
piloted today are mind-blowing because they are tailored to each
individual learner. Some . . . are already remarkable, and they'll only
get better in the years ahead.'' \32\ We should make sure that no one
is denied full use of these ``mind-blowing'' technologies, particularly
those students who need it the most.
---------------------------------------------------------------------------
\30\ There are numerous AI programs that claim to assist young
people improve their reading skills. A small sample includes:
Khanmigo. The Khan Academy AI tutor.
Amira. An AI-powered reading tutor that provides
personalized help for struggling readers. Amira listens to students
read out loud, assesses their reading, and provides feedback and
support when they struggle.
Giffie. An AI-powered reading tutor that helps kids
practice by chatting with them, helping them pronounce words, and read
sentences.
Ello. An AI reading coach that supports parents in
creating the best learning environment for their child.
\31\ Research shows that certain interventions--such as frequent,
small group tutoring and extra learning time on school breaks--can
produce significant gains. AI provides a tutor equivalent for families
that cannot afford tutors, who make up a significant portion of the
families with underperforming readers.
\32\ https://www.gatesnotes.com/The-Year-Ahead-2024
---------------------------------------------------------------------------
Ninth, the administrative cost of shutting down and starting up again
is high.
The Federal government spent tens of millions to start up the
program, as did the states, community groups and the Internet Service
Providers (ISPs.) This includes $66 million in outreach grants to
nonprofits, state, and local government, and others to assist in the
sign-up process, a process that would have to be repeated if the
program were to end and then in the future be brought back.
To shut down will create massive confusion, a loss of trust, and
other costs that are hard to pinpoint in terms of exact dollars.
And there are certain elements of the program, such as having a
national verifier, that cannot be duplicated easily in a world of
voluntary ISP programs.
And we can project that the biggest waste this program could have
would be shutting it down now and then restarting in the future. For if
there is one thing we should all be certain of it is that we will have
to do this in the future, as connectivity becomes even more important
for participating in the economy and society.
In summary, losing the ACP will result in slower economic growth,
increases in the cost of healthcare, education, job training and
placement, and other social services, while decreasing the
effectiveness of those services.
Those trends are going to be felt even more in rural areas and in
military families. And those trends will be exacerbated as AI becomes
embedded in our economy and society.
Let us not take the greatest step backwards any country has ever taken
in terms of closing the digital divide.
Let's adopt a clean ACP extension and then work hard to reform the
entire Universal Service Program to put it on a sustainable basis.\33\
Let's grab the opportunity broadband creates to improve our economy,
our society, and our future by making sure, as Congress wrote, that all
Americans have the broadband access they need to fully participate in
the economy and the society.
---------------------------------------------------------------------------
\33\ In this regard, I am in complete agreement with the 20 House
Republicans who wrote to Speaker Johnson last month asking for action
on ACP, writing that ``We believe that bipartisan solutions are within
reach to ensure uninterrupted access to the ACP while concurrently
pursuing long-term funding strategies.'' https://
brandonwilliams.house.gov/news/documentsingle
.aspx?DocumentID=1787
Senator Lujan. I appreciate that, Mr. Levin. Thank you very
much.
Dr. Winfree, you're recognized for five minutes.
STATEMENT OF PAUL WINFREE, Ph.D., PRESIDENT AND CEO, ECONOMIC
POLICY INNOVATION CENTER
Dr. Winfree. Thank you very much, Chairman Lujan, Ranking
Member Thune, members of the Committee. I was thinking about
using my 5 minutes to sing ``Happy Birthday'' to Senator Welch,
but I don't think anybody wants that, so.
[Laughter.]
Dr. Winfree. Like the development of canals and railroads
in the 19th century and highways in the 20th century, access to
affordable high-speed Internet will determine regional
development, as well as America's ability to continue to grow
by leading the world in innovation.
Fortunately, policymakers have paid an incredible amount of
attention to the issue of broadband affordability over the past
decade. This has led to many new policies that we can use as
guidance. These policies include deregulation, as well as
subsidizing the demand for high-speed Internet and the supply
of Internet service providers or ISPs.
We have learned that deregulation and competition have
reduced prices. We have also learned that policies subsidizing
demand can increase prices if they do not fundamentally change
the demand for high-speed Internet or the supply of ISPs.
Experience has demonstrated that deregulation can produce
significant gains for consumers, especially when it enhances
transparency by increasing the scale on which providers can
compete on price and the quality of services.
One recent case of how deregulation reduced prices was in
2017, when Congress nullified a rule enacted by the FCC
regarding consumer data sharing. Before the FCC's 2016 rule,
companies designed plans that allowed consumers to opt in or
out of data sharing at different subscription rates. Those who
chose to opt in paid lower rates than those who decided to opt
out.
But in 2016, the FCC enacted a rule requiring consumers to
opt in.
Congress nullified this rule using the Congressional Review
Act process. The results created more options at different
price points for consumers. The 2020 Economic Report of the
President found that the CRA reduced wireless prices by more
than 10 percent and wired prices by as much as 2 percent.
At the same time, subsidizing demand can increase prices,
especially when the unemployment rate is high and the
underlying inflation rate is high as well--or excuse me,
unemployment rate is low and the interval--and inflation rate
is high.
There are several ways that the Federal Government
subsidizes the demand for broadband. One such program is the
Affordable Connectivity Program, or ACP, which provides a
monthly subsidy of $30 to low-income households, as well as a
$100 one-time subsidy to buy a tablet, laptop, or desktop
computer. Economic theory, as Senator Cruz mentioned earlier,
would predict that a demand subsidy can act as a price floor,
especially in a market where the demand and supply of a product
remain relatively fixed. In this environment, the producer, in
this case the ISPs, will caption a portion, if not all, of the
subsidy.
In a recent paper, I found that there is a positive
relationship between the percentage of households receiving ACP
subsidies and the increase in the average total monthly price
for broadband. Importantly, I do not find any statistically
meaningful association between ACP subsidies and prices when
the level of households receiving subsidies is under 7 percent,
but today about 15 percent of households across the country
receive an ACP subsidy. That corresponds with an average
increase of about 7 percent in the total cost of a monthly
broadband subscription.
These estimates do not change, even when factoring in the
market concentration of ISPs. Based on the estimates in this
paper, the average cost of broadband is about $5.48 per month
higher because of ACP, implying that ISPs are capturing about
18 percent of the total subsidy. If 40 percent of households
were enrolled in ACP, as would be the case under the Biden
administration's enrollment proposal, the average change in
prices for plans would be about $9.39.
We've seen how ISPs can offer choices to consumers and pass
along savings through lower prices in a competitive market,
when they are not heavily regulated.
The same could be true under a more competitive market
post-ACP. Subsidizing demand through ACP also makes consumers
less sensitive to prices and quality. This advantages large
existing ISPs who are more likely to have had existing market
share when the program was created.
If ACP funding were to become exhausted, companies would be
encouraged to compete for consumers shopping for better plans.
In fact, according to Communications Daily, most ISPs have
already told their investors that when ACP ends, they don't
plan to lose any money, because they will be competing on price
and quality to attract consumers who are coming off of
subsidized coverage. Just in the last week alone, we saw a
major ISP offer a $9.95 plan that wasn't being offered again,
before the exhaustion of ACP funding was on the horizon.
Ultimately, this will benefit everyone by creating a more
sustainable, affordable marketplace for high-speed Internet.
Thank you very much, and I look forward to your questions.
[The prepared statement of Dr. Winfree follows:]
Prepared Statement of Paul Winfree, Ph.D., President and CEO, Economic
Policy Innovation Center
Chairman Lujan, Ranking Member Thune, and Members of the Committee,
thank you for inviting me to testify today.
The issue of broadband affordability is critical to the success of
the American economy. Like the development of canals and railroads in
the 19th century or highways in the 20th century, access to affordable
high-speed Internet will determine regional development as well as
America's ability to continue to grow by leading the world in
innovation.
Fortunately, policymakers have paid an incredible amount of
attention to the issue of broadband affordability over the past decade.
This has led to many new policies that we can use as guidance on how to
increase broadband affordability. These policies include deregulation,
new regulations, as well as subsidizing demand for high-speed Internet
and the supply of Internet service providers (ISPs).
What we have learned from those different policies is that
deregulation and competition have reduced prices. We have also learned
that policies that subsidize demand, such as the Affordable
Connectivity Program, tend to increase prices. This is especially true
if they do not fundamentally change the demand for high-speed Internet
or the supply of ISPs.
Deregulation Reduces Prices of High-Speed Internet
Experience has demonstrated that deregulation can produce
significant gains for consumers, especially when it enhances
transparency, by increasing the scale on which providers can compete on
the price and quality of services. One recent case of how deregulation
reduced prices was in 2017 when Congress nullified a rule enacted by
the Federal Communication Commission (FCC) regarding consumer data
sharing.
Before the enactment of the FCC's 2016 rule, ISPs could share
consumer data with companies unless the consumer ``opted out'' of the
data-sharing arrangement. Companies designed plans that allowed
consumers to opt in or out of data sharing at different subscription
rates. In essence, those who chose to opt-in paid lower rates than
those who decided to opt out of data sharing. This is because companies
would sell that consumer data and use it to reduce the price of
Internet service.
The FCC enacted a rule in 2016 that required ``opt-in'' to a data-
sharing model. However, Congress used the Congressional Review Act
(CRA) process to cancel this rule in 2017. The 2020 Economic Report of
the President, written by the White House's Council of Economic
Advisers, found that the CRA overturning the FCC's rule requiring
consumers to ``opt-in'' to data sharing reduced wireless prices by more
than 10 percent and wired prices by as much as 2 percent (see Figure 3-
4 above from the 2020 ERP).
Subsidizing Demand Can Increase Prices for High-Speed Internet
In December 2020, Congress passed the Consolidated Appropriations
Act of 2021 (P.L. 116-260) that established the Emergency Broadband
Benefit Program (EBB). EBB was a temporary subsidy of up to $50 per
month. EBB was intended to help low-income households afford broadband
Internet services amid the COVID-19 pandemic when most students were
still engaged in remote learning. The initial appropriation for the
program was $3.2 billion.
In November 2021, the Infrastructure Investment and Jobs Act (IIJA
or P.L. 117-58) made three significant changes to EBB. First, it
eliminated the sunset of the program, which was set to coincide with
the expiration of the COVID-19 pandemic. Second, it provided another
$14.2 billion for the program. Third, it renamed EBB as the Affordable
Connectivity Program (ACP).
Like its predecessor, ACP provides a monthly subsidy of $30 per
month to low-income households that purchase services from
participating ISPs. ACP also provides a $100 one-time subsidy to buy a
tablet, laptop, or desktop computer. There are currently 23.3 million
households enrolled in ACP (based on data from February 2024).\1\ In
other words, about 15 percent of all households in the U.S. receive a
subsidy.
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\1\ Federal Communications Commission, ``Affordable Connectivity
Program Enrollment and Claims Tracker,'' https://www.usac.org/about/
affordable-connectivity-program/acp-enrollment-and-claims-tracker/,
(accessed January 3, 2024).
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Why Might Have ACP Increased Prices?
Economic theory would predict that a demand subsidy can act as a
price floor, especially in a market where the demand and supply of a
product remain relatively fixed. In this environment, the producer (in
this case, ISPs) will capture a portion (or even all) of the subsidy.
The FCC has said that a goal of ACP is to close the digital divide
for low-income consumers. However, most ACP subsidies are going to
households who already have broadband. FCC surveys have found that
around 80 percent of ACP recipients already had broadband before the
subsidy.\2\
---------------------------------------------------------------------------
\2\ Federal Communications Commission reported to GAO that survey
data showed ``. . .approximately 16 percent of respondents indicated
they had no Internet access prior to enrollment in the ACP''; see GAO,
Affordable Broadband: FCC Could Improve Performance Goals and Measures,
Consumer Outreach and Fraud Risk Management, GAO-23-105399, https://
www.gao.gov/assets/d23105399.pdf. Also, see FCC's 2024 survey data
which shows that 21.8 percent said they had no Internet service, and
the remaining 78 percent had either home, mobile, or both services
before ACP; see FCC, Measuring The Impact of the ACP: Survey Results
Question 1, published Feb. 29, 2024, https://www.fcc.gov/sites/default/
files/ACP-Survey-Results.pdf
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The FCC has also tried to study the effect of losing ACP on
Internet service. In a survey conducted earlier this year, the FCC
reports that ``more than three-quarters (77 percent) of survey
respondents say losing their ACP benefit would disrupt their service by
making them change their plans or drop Internet service entirely.''
However, this is an inaccurate reading of the survey.\3\
---------------------------------------------------------------------------
\3\ Federal Communications Commission, Measuring The Impact of the
ACP: Survey Results Question 1, published Feb. 29, 2024, https://
www.fcc.gov/sites/default/files/ACP-Survey-Results.pdf
---------------------------------------------------------------------------
The 77 percent referenced by FCC is derived by adding two responses
together including the 29.3 percent of respondents who said that they
would choose a different service and the 47.6 percent who said that
they would choose a lower cost service. Only 15.7 percent said that
they would drop their service with no alternative. This 15.7 percent
that would lose coverage in the absence of ACP is very similar to the
rate of new take-up in Internet service after the adoption of ACP based
on other FCC data.
One reason why it may not have increased demand is that the program
is duplicative of other programs. For example, the FCC's Universal
Service Fund Lifeline Program already provided a subsidy to low-income
consumers for broadband services (i.e., the Lifeline subsidy is $9.25
per month).
There has also not been a significant increase in the number of
ISPs that are associated with the ACP subsidy.\4\ This is not
surprising given that ACP is a relatively small program, and providing
Internet service requires significant fixed investments in capital and
labor.
---------------------------------------------------------------------------
\4\ According to IBIS data, the average growth rate in the number
of ISPs has been relatively constant over the past several years.
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The Potential Effect of ACP on Prices
In a recent paper, I estimate the relationship between ACP
enrollment in regional prices for high-speed internet.\5\ I find that
there is a positive relationship between the percentage of households
receiving ACP subsidies and the increase in the average total monthly
price for broadband since 2022.\6\
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\5\ Paul Winfree, ``Bidenomics Goes Online: Increasing the Costs of
High-Speed Internet,'' Economic Policy Innovation Center, January 8,
2024, https://epicforamerica.org/publications/bidenomics-goes-online-
increasing-the-costs-of-high-speed-internet/.
\6\ This is measured as the change in prices as a function of the
percentage of households receiving an ACP subsidy.
---------------------------------------------------------------------------
However, there is no statistically meaningful association between
ACP subsidies and prices when the level of households receiving the
subsidies is under 7 percent (see Figure 1). Today, about 15 percent of
households across the country receive an ACP subsidy. That corresponds
with an average increase of about 7 percent in the total cost of a
monthly broadband subscription. These estimates do not change even when
factoring in the market concentration of ISPs.
The FCC finds that there is a nonlinear relationship between
broadband speed and the price paid for different speeds. Figure 2 shows
the relationship between ACP subsidies and prices for lower broadband
speeds (measured as less than 20 Mbps in download speed). Here you can
see that the proportion of households receiving an ACP subsidy is
positively associated with prices for lower-speed plans. The change in
prices is higher in states with a greater percentage of households
receiving ACP subsidies relative to the price change for all plans. One
possible explanation is that broadband service providers are marketing
their lower-speed plans to those eligible to receive the ACP subsidy
while raising the cost of these basic plans to capture larger
proportions of the subsidy.
Table 1 shows the average change in price for broadband plans that
is associated with a percent of households receiving an ACP subsidy.
Based on estimates in Winfree (2024), the average cost of broadband is
about $5.48 higher because of ACP while broadband service providers are
capturing about 18 percent of the total subsidy. If 40 percent of
households were enrolled in ACP, as would be the case under the Biden
Administration's enrollment proposal, the average change in prices for
plans would increase by about $9.39 and 31 percent of the subsidy would
be pocketed by broadband service providers.
Table 2 shows the same estimates for lower-speed plans. Under
higher levels of ACP enrollment, lower-speed plans will become more
expensive with the broadband service providers able to capture larger
portions of the total subsidy. This makes sense given that the ACP
subsidy essentially operates as a floor for the prices of broadband.
The Biden Administration has posited that ACP helps households save
about $500 million per month on Internet bills. However, that
calculation does not include the effects of ACP on prices for broadband
services. Based on the estimates provided in this report, ACP likely
reduces the monthly net cost of broadband by about $380 million for
households who qualify for the subsidies after adjusting for the
increase in prices. Once we factor in the price increase for all
households (including ACP beneficiaries), ACP likely increases the net
out-of-pocket cost of broadband that households pay by about $185
million per month or $2.2 billion per year.\7\
---------------------------------------------------------------------------
\7\ This is calculated using estimates from this report as well as
data from the FCC and the U.S. Census Bureau.
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Competition Will Make Broadband More Affordable
In the case study on deregulation referenced above, we saw that
when providers can compete on prices and services, they offer choices
to consumers and pass along savings through lower prices in a
competitive market. The same could be true under a more competitive
market post-ACP.
Today, a large portion of the ACP subsidies go to a fraction of the
ISPs and are slightly more likely to serve urban areas. According to
the FCC, for every rural household that receives an ACP subsidy, six
urban households receive a subsidy.\8\ In other words, urban consumers
were disproportionately served by ACP given 16 percent of the subsidies
are going to rural households who make up nearly 20 percent of the
population.
---------------------------------------------------------------------------
\8\ https://www.fcc.gov/sites/default/files/%5b08-14-2023-
39%5dFCC_ACP_Infographic_v10
.pdf
---------------------------------------------------------------------------
Subsidizing demand through ACP also makes consumers less sensitive
to prices and quality. This advantages large existing ISPs who are more
likely to have had market share when EBB and ACP were created. If ACP
funding were to become exhausted, many companies would be encouraged to
compete for consumers who would be shopping for better plans (as the
FCC survey data referenced above shows). Most ISPs have told their
investors that when ACP ends, they don't plan to lose any money.\9\
Other ISPs have reported to Communications Daily that they explicitly
plan to compete on price and quality to attract consumers who are
coming off subsidized coverage.\10\
---------------------------------------------------------------------------
\9\ Matt Daneman, ``ACP's End Could Bring New Subscribers,
Providers Tell Wall Street,'' Communications Daily, March 5, 2024.
\10\ Ibid.
---------------------------------------------------------------------------
There are also much better ways to subsidize demand than to provide
payments through ACP which go directly to ISPs. For example, subsidies
could be provided directly to households to be used on Internet service
or other household items. Also, policymakers could look to the tax
code. Some provisions are scheduled to expire at the end of 2025. These
expiring provisions reduce the cost of capital (and increase domestic
investment) and allowing the expirations to take effect would raise the
tax liability for the average household qualifying for ACP by more than
three times the amount of the ACP subsidy.\11\
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\11\ Author's calculations based on population making less than 200
percent of the Federal poverty level using the Tax Foundation's 2026
Tax Reform Calculator, found here: https://taxfoundation.org/data/all/
federal/tax-calculator-tcja-expiration/.
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The results in this testimony, along with data on how ACP is
failing to close the digital divide, suggest that governments at all
levels should focus on increasing the supply of Internet services to
provide consumers with more access to lower cost services. Focusing on
deregulation and competition avoids the costs associated with ACP which
can raise prices for all consumers without meaningfully closing the
digital divide. Deregulation and competition can also avoid the hidden
costs of subsidizing demand with additional inflation fueled by deficit
spending.
Senator Lujan. Thank you, Dr. Winfree.
I'm now going to recognize myself for five minutes of
questions, and Ms. Nevarez, I'm going to begin with you. Again,
thank you for traveling from New Mexico to be with us today,
and for your work over many years to connect every New Mexican
to broadband.
Now Ms. Nevarez, yes or no, from what you have seen and who
you have worked with on the ground, would students be
negatively impacted by a lapse in the Affordable connectivity
program?
Ms. Nevarez. Absolutely, yes. I'll add in all capital
letters.
Senator Lujan. Would----
Ms. Nevarez. Being a teacher at heart.
Senator Lujan. Would veterans be negatively impacted?
Ms. Nevarez. Yes.
Senator Lujan. Would seniors be negatively impacted?
Ms. Nevarez. Yes.
Senator Lujan. Would those who live in our tribal
communities be negatively impacted?
Ms. Nevarez. Yes.
Senator Lujan. Would those who live in rural areas be
negatively impacted?
Ms. Nevarez. Yes.
Senator Lujan. I appreciate those responses.
Now Ms. de Wit, can you please briefly provide a
perspective from your research on which populations will be the
most affected?
Ms. de Wit. At this point, the--at this point, we know that
nearly one-fifth of ACP households include seniors age 65 and
older. And based on the research that we can do, we know that
any changes to the program will have an adverse effect on
Americans over 50 as well as veterans.
What I would add is that we need better data and more
transparency on enrollment, and about the trends in population,
in order to fully understand how changes to the program would
have a negative effect on the vulnerable households that it's
attempting to serve.
Senator Lujan. Appreciate that.
Mr. Levin, you noted in your testimony that the digital
divide puts strain on our health care system. You also noted
that the Affordable Connectivity Program not only helps people
access their health care online, but also the increased use of
telemedicine creates enormous cost savings for our health
system.
You referenced a study by the University of Pennsylvania
that telemedicine was 23 percent less expensive for health
systems to deliver, compared to in-person visits. Many of the
most vulnerable populations who utilize the Affordable
Connectivity Program are also participants in Medicare or
Medicaid, or are veterans who receive their health care through
the VA. So that 23 percent savings is a significant cost
savings for the government.
Mr. Levin, from your research, from what you've seen, is it
possible that the economic benefit of the Affordable
Connectivity Program to the health care system are greater than
the cost of the government--of administering to the government,
than administering the program?
Mr. Levin. I'm not a health care economist, but I believe
the answer to be yes. And if it's not true today, it's going to
be true sometime in the very near future.
What we saw immediately in the wake of the pandemic was
that health care started accelerating its movement to
telehealth. I believe in February 2020, one percent of Medicare
care visits were over telehealth. In April, it was like 70
percent.
That was inevitable, but it started to accelerate, and then
efficiencies grow in. So it's almost inevitable that if not
today, at some time in the near future, Internet access can
actually save money for those programs.
Senator Lujan. So on that same note, do you believe that
between health care, employment, and education, investing in
the Affordable Connectivity Program may actually result in a
cost savings, a net cost savings to the government?
Mr. Levin. Yes. And for example, in the job training and
job placement, we find that people who have Internet access get
jobs faster, as you would expect. And then they spend less time
on unemployment. Besides savings to the government.
Senator Lujan. I appreciate that.
Now, Ms. Nevarez, you noted in your testimony that without
the reliable customer base that the Affordable Connectivity
Program also provides, some of New Mexico's small local
Internet service providers or ISPs are at risk of going
bankrupt. When a small local provider in a rural area in New
Mexico goes bankrupt, what happens to their customer base? And
can--can they just find a new provider?
Ms. Nevarez. Actually, it depends, but generally, the
customers lose service. And in rural New Mexico, finding an
alternate provider is very difficult.
Actually, these networks didn't exist. If they were easy,
we would have built them already. So when a small rural
community builds a network, there's often no competition, or
little to no competition. So for those small providers, if they
go bankrupt or fail, those customers lose service. And
oftentimes, the small government offices, the local regional
government offices, and community anchor institutions that also
use that network fail.
And I would add as well, in New Mexico, we have 22 tribes
that are building their own networks. Not only do they build
them, they are running them. And they have trained local
community members.
So the local workforce also loses out. Because those
community members who've been trained as fiber technicians,
those jobs go away, and those community members either have to
find an alternate job, and rural New Mexico, it's not always
easy. They have to travel further or move to the city.
Just a shout-out, our state has been tenaciously working on
that. And we're proud to report over 200 fiber optic
technicians, with 80 percent of them being Native or Hispanic,
have been trained in the last 2 years to run their own
networks. 70 percent of those had some college but no college
degree. It's very exciting.
Senator Lujan. I appreciate that.
Next, we will hear from Senator Vance. Senator Vance,
you're recognized for five minutes for your questions.
STATEMENT OF HON. J. D. VANCE,
U.S. SENATOR FROM OHIO
Senator Vance. Great. Thank you, Mr. Acting Chair. I
appreciate you.
And I appreciate all of you for being here. I wanted to
sort of focus my questions on, you know, the--the sort of
economic impacts from the consumer's perspective, but also from
the government's, and also the sort of the businesses that are
investing in broadband infrastructure.
And Mr. Levin, I'd like to direct my questions to you. So,
you know, I--in your written testimony, you described the
positive impact on employment rates from discount Internet
plans. And you sort of explained how greater labor force
participation and so forth comes from, you know, having access
to high quality broadband.
And I know that's an issue, especially in our rural
communities. But of course, it's--it's an issue in a lot of
different communities as well. I'd like to sort of understand,
how do you think about the cost savings? Right? The--one of the
biggest challenges that we have when it comes to re-funding the
ACP program and reauthorizing it, which I--I support, is, you
know, of course, the pushback that we are in sort of tight
budgetary times. We have to think about how to save money in
this town, which is something we do far too little of.
Could you just help me think about the economic upsides of
the ACP program, as you understand it? What--what do we gain
from investing in this program?
[Technical issue.]
Mr. Levin. There are multiple different ways of thinking
about it. I cited in my oral testimony a study by a Google
economist who talked about consumer surpluses in 2013 being
$500 per user. That number undoubtedly has gone up. And if you
look at the study, there are just all kinds of different ways
in which savings of time. I think all of us have experienced
the Internet is able to do certain things to speed up--able to
shop, able to determine the most--the cheapest option for a
product that we want. There are those kinds of savings that
accrue directly to an individual.
But what we also see is, particularly in terms of the
government, which is in a way sharing in those costs, in the--
in the case of telehealth, there are very direct savings.
Because if you save one emergency room visit by having the
person come on broadband and talk to someone, and if--and if
they turn out not to go to the emergency room because they
don't really need to, I believe that's like a $3,000 savings.
And in terms of time.
I mentioned earlier, in terms of job training and
placement, there's direct benefit to the government, not just
to the person, but to the government.
I think if we look at education, and my God, what AI is
going to do to education, I'm very excited about it, I think
it's going to be great. But if the very people we most want to
be able to use those tools to learn how to read, and reading
scores in fourth grade are a great predictor of economic
success later on in life, that's another version of those kinds
of savings.
Senator Vance. So Mr. Levin, have you ever done any sort of
analysis of the--of the net benefit? So if you take, for
example, a dollar spent on the ACP, you know, what is--what is
the benefit in terms of government savings from things like,
you know, Medicare, diverting people into telehealth, which
saves a lot of money, but also consumer upside? Have you ever
sort of tried to understand the net effect of, you know, the
given amount that we spend on the ACP?
Mr. Levin. Yes. Others are much better than that, better--
better than me at that. My--my friend and probably the leading
expert on that kind of data is a guy named John Horrigan, who
estimated that for every dollar spent, there's $2 of gain to
the individual.
There was a study that said for every dollar spent on ACP,
we get a $3.89 increase in GDP.
I have not done a comprehensive, nor do I believe there is
a comprehensive study on----
Senator Vance. Sure.
Mr. Levin.--health care. I sure wish there was.
Senator Vance. Yes.
Mr. Levin. I think it's something which the government
should do.
But it's really about a kind of a larger trend in which we
take advantage of this incredible opportunity to rethink how we
deliver services.
Senator Vance. Yes.
Mr. Levin. And there's almost no doubt----
Senator Vance. Yes.
Mr. Levin.--when--that particularly when we come to health
care, you'd see a benefit.
Senator Vance. Great. Yes, I'd--I'd of course be very
interested in that too.
So--one just final question is, you know, when I talk to,
you know, obviously we talked about the consumer side of this
and the government side of this. When I've talked to a number
of businesses who invest in rural broadband, and obviously
it's, you know, very expensive to lay a mile of fiber----
Mr. Levin. Right.
Senator Vance.--in southeastern Ohio----
Mr. Levin. Mm-hmm.
Senator Vance.--compared to central Ohio, where it's a lot
more densely populated, the terrain's a little bit, you know--
--
Mr. Levin. Mm-hmm.
Senator Vance.--less tough and so forth. You know, one of
the things that sort of justifies the very large capital
expenditure of that infrastructure is knowing that there are
going to be customers on the other end. And that's something
that the ACP program ensures. Could you speak to sort of that
economic benefit a little bit?
Mr. Levin. Yes. BCG did a study which suggests that the
BEAD dollars go 25 percent further if you have ACP, for
precisely the reason you just said. That if you have a
guaranteed population that you know is going to pay, and
they're going to pay on a regular basis, and one of the
mistakes people make is they say only 22 percent had--didn't
have broadband. Actually, there were a lot of people who were
on broadband and off broadband. That's the largest group.
Senator Vance. Sure.
Mr. Levin. But if you know you're going to have that
population, you need less of a government subsidy to build out
that network.
Senator Vance. Yes, and I'm--I'm mindful of my time here,
so--so I'll yield. But just one observation, you know,
anecdotally, which is not always data, but I do think it's
useful, is I talk to a number of folks who have invested a lot
in rural broadband infrastructure in the state of Ohio who have
told me straightforwardly they would not have made that
investment if not for the existence of the ACP program. So I
think something important for us to keep in mind as we think
about how to build out the 21st century digital infrastructure
for our country.
So thanks, Mr. Chair. I appreciate it.
Senator Lujan. Thank you very much.
Next, we'll hear from Senator Klobuchar. You're recognized
for five minutes.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Chair, and thank
you for the work.
Happy birthday to Senator Welch. Nice day for a birthday. I
want to actually thank him and, to Senator Vance for their work
on making sure that we continue getting funding for the
Affordable Connectivity Program Extension Act. And we all know
this is an ongoing problem right now, and that Chair Cantwell
has been working to include this funding for ACP.
So I think it's really important to make the case that I
know you have all been doing throughout this hearing about what
this means. And I want to focus especially on some of the
issues in rural America in my state right now.
So we know that rural communities are particularly in need
of support to make broadband available at affordable prices.
I've heard from first grade teachers, we had during the
pandemic, some of the numbers were 20, 30, 40 percent in some
of our counties that while some of the kids were able to
access, including community college classes via the Internet,
other ones just were given paper and pencil and their, like,
workbooks every single day. It was a complete disconnect.
Mr. Levin, do you agree that programs like ACP can help
incentivize providers to serve high-cost areas?
[Technical issue.]
Mr. Levin. Five percent differential.
Senator Klobuchar. And Ms. de Wit, you note that the
challenge of building out broadband networks is distinct from
making sure consumers can afford to access those networks. Can
you discuss how the expiration of ACP could impact the
investments that we're making in broadband infrastructure?
Ms. de Wit. Absolutely. And what we know to be true is that
right now, households that are unserved are currently the most
expensive and difficult to serve. For example, the cost per
passing in Minnesota using capital project dollars is $7,300
per location.
Without ACP, our BEAD connections will be even more
expensive, so we will see the increase of those costs per
passing move up without that ACP support. Rural providers,
particularly those in Minnesota who have been the backbone of
ensuring robust and affordable connectivity throughout the
state, simply may not be able to shoulder the cost, both of the
capital deployment as well as the operations without that
subsidy.
Senator Klobuchar. Exactly. Thank you.
The--I mentioned education. There was one mom in Sibley
County, Minnesota, who told us that she's worried her kids
aren't going to be able to complete their homework if she can't
get the access.
And Mr. Levin, you note that students without home Internet
have lower grades and complete homework less often. Talk about
why ACP is important to get at that?
Mr. Levin. That was a study that came to that conclusion,
but it makes total intuitive sense that--my sister actually was
a school teacher, and many years ago she kind of blamed me for
the fact that half of her students had Internet and half of her
students didn't, and it was a really big problem for her. And
that's a problem we're going to see if ACP goes away.
It's just that as all of us do, when we are writing various
things or trying to solve various problems, we now depend on
the Internet to give us the information we need. It also helps
in writing in a variety of ways. So the students are no
different than the rest of us in that regard.
Senator Klobuchar. Thank you.
Ms. Nevarez, can you discuss how you've seen affordable
Internet open up educational opportunities in your work leading
the community learning network?
Ms. Nevarez. I am actually a certificated teacher, so
learning is important. In our state, when COVID hit, many
students were struggling. We actually had students, like you
mentioned, on--on paper and pen or trying to do homework with a
cell phone.
In our case, many of----
Senator Klobuchar. It sounds like a lot of the senators,
but----
Ms. Nevarez. It's----
Senator Klobuchar. --continue on.
Ms. Nevarez. Yes.
[Laughter.]
Ms. Nevarez. I think the--the best thing is to share the
example, would you want your own children, whether they're in
middle school, high school, college, to have to do their term
papers with old-fashioned encyclopedias, or be able to compete
by accessing information and participating online?
Every one of us use these tools daily. We're used to it,
and we don't realize how difficult it is. In our state, without
home access, and for many of our communities, without the
income to afford it and to have reliable and affordable
Internet, they can't do a class online. Zoom calls take
broadband strength. And they're driving to the community anchor
institutions to sit in a hot car, or a cold car if it's
snowing, to try to compete with their fellow classmates and to
complete assignments.
Senator Klobuchar. OK. Thank you.
And thank you, Mr. Chair, for all your work in this area as
well, and leadership.
Senator Lujan. Thank you, Senator Klobuchar.
Next, we're going to hear from the Ranking Member of the
Full Committee, Senator Cruz.
Senator Cruz. Thank you, Mr. Chairman.
Dr. Winfree, you note in your testimony that one proven way
to promote broadband affordability is through competition.
According to a recent study by Econ One, competition from 5G
fixed wireless service and home broadband markets was shown to
produce billions per year in consumer savings.
These are precisely the competitive benefits that the
Spectrum Pipeline Act, which I introduced in partnership with
Senators Thune and Blackburn, would provide. Unfortunately,
instead of expanding access to mid-band spectrum and promoting
competition from wireless services, the Biden administration
has engaged in anti-competitive technology bias while stalling
out on spectrum.
Dr. Winfree, in your judgment, how would my Spectrum
Pipeline legislation compare to the ACP in promoting long-term
broadband affordability?
Dr. Winfree. Spectrum auctions would increase competition
and bring more folks into the market. We would have more ISPs
doing more cool things with them, which would ultimately reduce
prices.
Senator Cruz. And lower prices, in turn, benefits
consumers.
Dr. Winfree. That's right. Benefits everybody.
Senator Cruz. And higher prices, which the ACP has
produced, that's hurting consumers. Is that right?
Dr. Winfree. That's right. I mean, one of the issues with
ACP is that it's a one-size-fits-all policy. It's a $30 monthly
subsidy regardless of where that person sits.
And one of the things that we've seen is that ACP has
predominantly covered folks living in urban areas relative to
rural areas. So ACP is not a solution for rural areas, assuming
that--that rural broadband connectivity is an issue, which I
think that it is. And I think that there's a lot that we can
ultimately do there.
Which begs the question, well, why don't we use this as an
opportunity to reform ACP?
Senator Cruz. Well, and I'll--millions of people across
Texas and across the country are hurting from inflation.
Inflation that has been galloping in the last three-and-a-half
years, particularly when Democrats had unified control of
Congress and the White House, where they spent trillions of
dollars we didn't have. They printed money we didn't have. They
borrowed money from China we didn't have. They're producing
inflation that is hurting working families across the country.
And we now have Democrats coming back saying we want to spend
billions more, even though it will fuel inflation and it will
drive up the cost for consumers across the board. Is that
right?
Dr. Winfree. That's right. So there are two ways that ACP
affects prices. The first way that it affects prices is by
setting, essentially, a price floor for plans.
What my research shows is that that predominantly hits,
again, urban areas. So what we saw before ACP is a bunch of
plans that were, say, 20 up, 20 down, $10 a month. Those went
away during ACP. Right?
So the--the speed levels went up moderately, but the price
level went from $10 to $30, because that's where the ACP
benchmark is. So all those cheap plans went away.
And then the second way that ACP affects inflation is
through government--through government spending. I mean, right
now we've seen, you know, we're--we live in an economic
environment where the Fed is having a really difficult time
getting inflation under control. Interest rates on short-term
debt are five-and-a-half percent. And so every dollar that is
spent by the Federal Government is ultimately inflationary
right now.
Senator Cruz. So and are consumers better off at being able
to get broadband at $10 or $30?
Dr. Winfree. $10.
Senator Cruz. It's pretty remarkable. All right, let's
shift to another topic.
Dr. Winfree, in your testimony, you raised that there are
other low-income broadband subsidies in addition to ACP. In
fact, as we've heard, there are multiple taxpayer subsidies for
Internet connectivity. GAO recently identified over 130 of
them.
The longest standing of these are the Universal Service
Funds programs at the FCC.
Dr. Winfree. Mm-hmm.
Senator Cruz. I don't think we would be having this
conversation about broadband affordability if the FCC were
properly managing the Universal Service Fund programs.
Dr. Winfree, aren't some of these FCC programs demand-side
subsidies? And--and what do these programs spend on a yearly
basis?
Dr. Winfree. Sure. They're both demand-side subsidies, and
then they're also supply-side subsidies. So there are four main
programs. There's Lifeline; the High Cost Program; Schools and
Libraries, or--or E-Rate; and then Rural Health Care. And
together, those four programs spend about $9 billion a year.
Senator Cruz. And yet, according to at least some members
of this committee, the FCC needs yet another program. Why not
fix the current programs and take the lessons the ACP has
learned and apply them to making sure the funding we actually
have works? This is what I proposed in my blueprint for
Universal Service Fund reform.
In your view, Dr. Winfree, what changes should Congress
consider making to ACP and the Universal Service Fund before
adding additional funding to any of these programs?
Dr. Winfree. Sure. I think there are a number of reforms
that can be added. I mean, we can learn from the experience of
the Affordable Care Act, Obamacare. Premium tax credits went to
low-income individuals, and we learned that folks who were
receiving those tax credits shouldn't have actually been
receiving those tax credits.
And so one of the things that--that Congress can do is it
can--can learn from that experience to actually recapture ACP
funds that should be used for low-income populations. It's
probably going to folks who are making much more than two times
the Federal poverty line.
Another option that the FCC IG has explored is requiring
Social Security numbers for the receipt of ACP benefits to make
sure that, again, folks who are entitled to the program are
actually receiving the benefit, and that the benefits are not
going to folks who--who shouldn't--who shouldn't be receiving--
receiving those benefits.
But, you know, as I mentioned before, ACP's--one of ACP's
main problems is that it's this universal program. It's a one-
size-fits-all issue. And if ACP funding should expire and
Congress should begin thinking about how to reform some of
these underlying programs, it needs to take those regional
differences into account, right? The issues that we see in New
Mexico versus Minnesota versus Texas are--are all different,
and these one-size-approaches just don't work. We've learned
that time and time again.
Senator Cruz. Thank you.
Senator Lujan. Thanks, Senator Cruz.
Next, we'll hear from Senator Peters. You're recognized for
questions.
STATEMENT OF HON. GARY PETERS,
U.S. SENATOR FROM MICHIGAN
Senator Peters. Well, first off, I just want to thank our
witnesses. Thank you for being here today.
And I also want to thank Chair Lujan. Thank you for holding
this hearing.
And I think this hearing is extremely timely, because
almost one million Michigan households are on the precipice of
losing the Affordable Connectivity Program, which was passed by
Congress two years ago, and as we all know, it helps eligible
families afford the Internet.
And in today's world, the Internet is--is not a luxury,
it's--it's a necessity. And it's one that should be affordable
to all Americans. And I believe that Congress must do its job
and fund this critical program as soon as possible, or 16
percent of American households are going to face Internet
shutoff or rate hikes.
And as a supporter of the Affordable Connectivity Program
Extension Act, I'm going to keep fighting for funding, and I
challenge all my colleagues, including those on the other side
of the aisle, to--to do the same.
Ms. de Wit, my first question is for you. In your
testimony, you mentioned how the Affordable Connectivity
Program is closely linked to the state's ongoing plans for BEAD
deployment. My state of Michigan received nearly $1.6 billion
in BEAD funding, the fourth-highest allocation in the nation,
to close the digital divide and to bring high-speed Internet to
every corner of Michigan, which is both urban, suburban, and
vast tracts of rural areas as well.
Ms. de Wit, can you speak to how it would impact the BEAD's
program ability to reach every underserved and unserved
location if ACP is lapsed? And--and additionally, do you think
that ACP's lapse could impact BEAD participants' decisions as
to where to apply for funding, and how far they can reach with
their proposed projects?
Ms. de Wit. I'll answer your second question first, which
is, yes. I do believe that ACP's lapse would affect an Internet
service provider's decision to participate in BEAD, because
they have said that. And that's why it's important to ensure
that we provide Internet service providers with that certainty.
With respect to the BEAD program writ large, in short, we
need every single dollar to connect unserved and underserved
Americans across this country. As you outlined, Michigan is one
of the states that has a complicated problem ahead of them. And
thankfully, it has a very well-run broadband office and a
strong strategy.
But I think that the important consideration is that BEAD
and ACP were designed to work together. They are designed to
work in tandem to defray the costs of building networks,
whether we are looking at urban, rural, or suburban
communities. And because Congress requires ACP to participate
in--requires ISPs to participate in ACP to receive BEAD
funding, this means that we are providing them with a surety of
a guaranteed customer base, decreased churn, and long-term
retention.
Senator Peters. Very good. Ms. De Wit, as you well know,
the Universal Service Fund has long been a tool for connecting
Americans to voice service and to broadband access. However,
the USF has not been modernized to account for today's needs
related to universal broadband service.
And I'm a--I'm a proud member of the bipartisan USF working
group, led by Senators Lujan and Thune. And we have made
progress toward a long-term bipartisan solution that will
enable the USF to support broadband accessibility and
affordability for all consumers.
And one of my top priorities as a member of this working
group with Chair Lujan is to find a long-term sustainable
funding mechanism for ACP so Americans never have to face
another program cliff like the one that we have right now. We
have enough cliffs that we have to deal with. We don't need
this one as well.
So my question for you is, can you speak to the importance
of finding a way to sustainably fund ACP in the long term, such
as through modernizing the Universal Service Fund?
Ms. de Wit. Well, Pew does not have research on solutions
for the modernization of the Universal Service Fund at this
time. We do know that it is needed, and it is needed for all of
the reasons that you just outlined, which is why we appreciate
the work of you and others on that bipartisan and bicameral
working group to identify one, including incorporating the ACP
into that program.
However, Universal Service reform will take time. It will
take time to come to agreement, and moreover, it will take time
to implement. We don't have the luxury of time at this moment.
ACP is running out of money, and BEAD--potential BEAD
participants, states, ISPs, communities, we are putting their
connectivity solutions at risk by delaying, which is why we ask
that you provide the bridge to ACP today and continue work on
USF in the future.
Senator Peters. All right. Well, thank you for your
answers.
Chair Lujan, thank you so much.
Senator Lujan. Thank you very much, Senator Peters, and I
want to thank Senator Capito as well.
Mr. Welch, you'll be recognized next for five minutes.
Thanks for getting here early.
STATEMENT OF HON. PETER WELCH,
U.S. SENATOR FROM VERMONT
Senator Welch. Thank you very much.
You know, we have got an urgent, immediate situation that
has to be addressed, and that's the expiration of the ACP. And
there are two points that I want to make.
Number one, every witness here has acknowledged that the
debate about whether everybody needs the Internet is over. It
is over. And a lot of us, Ben Ray, you and I, were arguing pre-
COVID for rural America to get Internet. just like rural
America got electricity in the 1930s.
That was not an economic decision that was made, because it
didn't have business sense to have our companies extending
electricity in rural areas where there wasn't a big return, but
it was a social decision. And we made that, and a lot of us
were pushing for it.
When COVID came, it made the case for us, because you
couldn't go to work, your kids couldn't do homework, you
couldn't get a medical appointment. And this Congress, on a
bipartisan basis, really put enormous money into building it
out.
That doesn't do any good for folks if they can't get
connected to it. And I've listened to the--so that's number
one. We've got to have it. We've got to have it, and we all
know that. And that's a red state or blue state. It just
doesn't matter. The citizens we represent need it.
Second, there are a lot of folks who are on the margin,.
And the ACP, if it goes out now, a lot of those folks are going
to have to make very tough decisions. You know, example in
Vermont, some woman making $15,000 with two kids, single
parent, she has got a hard job trying to figure out how to make
ends meet, and has to make real sacrifices, sometimes in the
food budget. But she'll do it, because she wants her kid to be
able to do the homework.
Or a grandparent who wants to stay in touch with
grandchildren or their kids. And we've heard very compelling
arguments about some of the reforms that we should make.
Senator Capito has been a big advocate of that. And I agree
that those of us who advocate for a program have an obligation
to kick the tires, check it out, make reforms, so that the
intended purpose is what's being served, and it's not being
gamed.
So I, for one, who am a strong proponent of the Affordable
Connectivity Program, pledge to work with my colleagues,
Republican and Democrat, to make it better.
But we're not there yet. And what we can't do, Mr.
Chairman, as you so assertively state, is let this expire.
Because there are four million veterans who depend on this,
there are a lot of seniors who depend on it, and the economic
arguments that we're having back and forth, they're real, we've
got to deal with them, and some of those, Dr. Winfree, we can--
I can accept. But we can't let this expire. And that's what's
happening.
So my hope, Mr. Chairman, is that all of us work hard
together to try to get at least the short-term fix, while the
work you're doing, leading the universal--the--the working
group, comes up with a longer-term solution.
So I just want to express my gratitude to the witnesses
here. But I also want to express my enormous apprehension that
this Congress may fail by letting this expire, rather than
continue it while we work out the change--the long-term changes
that are needed for sustainable access.
Thank you. I yield back.
Senator Lujan. Thank you, Senator Welch.
Senator Capito, you're recognized for your questions.
STATEMENT OF HON. SHELLEY MOORE CAPITO,
U.S. SENATOR FROM WEST VIRGINIA
Senator Capito. Thank you. Thank you, Mr. Chair.
I--before I ask the questions, I would like to take a
moment to express my disappointment with how the markup went,
or should I say more accurately, did not go yesterday.
I have worked with my colleague, Senator Klobuchar, on my
Rural Broadband Protection Act beginning last Congress. It's a
common-sense bill that will help USF High Cost projects across
our country. It has been sitting in this committee since the
beginning of this Congress, and after working to improve the
bill, my substitute amendment was cleared to be marked up both
by the majority and the minority back in November.
I urge the Chair, through you, to schedule a legislative
markup this work period so that my top broadband policy
priority can be considered. I would appreciate you--we'll--
we'll talk to the Chair and Ranking Member about that.
So moving to my questions, Ms. De Wit, I know that many
states, and I think you've gone through this, and I caught the
tail end of you mentioning it to Senator Peters. West Virginia
was the second state that actually got their Part 2 BEAD plan
Okayed, and we're very excited about that. But can you describe
the impact on BEAD programs, because we have part of the
Affordable Connectivity Plan as part of our deployment plan,
how this will affect if the ACP does not get affected--or
funded?
Ms. de Wit. Yes, and thank you for the question, Senator
Capito, and for your ongoing work to continue supporting the
program, including for robust discussions about potential
reforms.
Right now, let me just draw attention to the current costs
per passing that were shared from West Virginia's Capital
Projects funds, and that's $4,200 per location. What research
from the Boston Consulting Group has found that without the
BEAD subsidy, we will see a $500 per location differential on--
--
Mr. Levin. Without the ACP?
Ms. de Wit. Sorry, yes. Without ACP. Sorry, excuse me.
So the Boston Consulting Group study found that without
ACP, the cost per passing may increase by $500 per location. So
what we can assume from this is that the cost for deployment in
West Virginia will increase without ACP available.
Senator Capito. Does the--is that--what did you say,
$4,200?
Ms. de Wit. Yes, ma'am, that--but that's with the Capital
Projects Fund, what the state has spent, and that includes
significant matching funds from Internet service providers as
well, so.
Senator Capito. Right. I've been told, and I can see,
living in such a beautiful state with lovely mountains, but
hard rocks in between, that that--that the cost to build in our
state, obviously, for fiber is--is much greater. How does that
$4,200 stack up? I'm just curious to know. Is that high as High
Cost?
Ms. de Wit. I would need to get back to you to quote the
specific numbers, but yes. That is--the numbers are high, and
of course, the cost per location passing is going to depend on
a number of factors, including the topography, as we are----
Senator Capito. Right.
Ms. de Wit.--all familiar with West Virginia----
Senator Capito. Right.
Ms. de Wit.--but also density of population.
Senator Capito. OK. Dr. Winfree, one of--I mean, I've been
alluded to as the one who wants to be the reformer, and I--I
couldn't be more passionate about this. I mean, just--I think
it was this week, earlier this week, the president of a local
Internet service provider said that he was informed that he's
eligible for the $30 a month because of the way it's--the
school lunch program in our state makes everybody eligible.
I mean, it cannot possibly be true that 23 million people
really need this. We've got to narrow it down to the need. I'm
supportive of the program. Could you respond to that?
Dr. Winfree. I think that's exactly right. I mean, as I
mentioned earlier, ACP is fundamentally not a--not a program
for rural areas. It is a program for urban areas. Most ACP
recipients live in urban areas, even after you adjust for the
fact that most people live in urban areas. And the challenges
that people have in both urban versus rural areas are very
different, as you are an expert on representing the great state
of West Virginia.
That said, like other government programs as well, I mean,
I referenced in my responses to Senator Cruz, we had a similar
challenge with the Affordable Care Act. There are premium tax
credits that people get to help them afford private health
insurance, and we--we learned very quickly that there were
millionaires who were receiving those premium tax credits----
Senator Capito. Right.
Dr. Winfree.--for lots of different reasons.
And so there needs to be a reconciliation process to make
sure that the--the funds are targeted in the best way and that
both urban--there's an urban versus rural adjustment.
Senator Capito. Well, yes, I would be interested in the
urban and rural adjustment. I just think that--I understand the
urgency and the--and the expiration, and instead of $30, I
understand it's $14. I don't know how long that's going to
last. Does anybody know what the long--yes?
[Audience interruption.]
Senator Capito. One month. So, you know, ostensibly not
long, not long at all. We've known this was coming. We've been
talking about reform for a year. I don't know why we have to be
pressed now to move forward to a way over-expansive program
that is being, is going toward people that, some people that
don't need it, so--because it just, it's not fair to the people
that do need it. Because it calls into question what's going to
happen with the entire program.
So I would--I would ask my colleagues to listen to experts
on the panel here to figure out a way that we can do both of
these things. And I think we can and meet the challenges.
Obviously, I'm in a state that has economic challenges. We have
some of the lowest broadband deployment in the entire country,
you know, and I think it's--the digital divide, you can see it
all over our state with economic development, education
progress, health care outcomes.
And so I am very passionate about getting to the last house
and to make sure that everybody has equal access, but that they
can afford it at the same time. So I thank you all for what
you're doing.
I appreciate, Mr. Chairman, the chance to address the
panel. Thank you.
Senator Lujan. Thank you, Senator Capito.
Senator Warnock, you're recognized for questions.
STATEMENT OF HON. RAPHAEL WARNOCK,
U.S. SENATOR FROM GEORGIA
Senator Warnock. Thank you so very much, Chairman Lujan.
I'm extremely disappointed that politicians in Washington
allowed the Affordable Connectivity Program to completely run
out of funding this week. This program is critical for helping
720,000 Georgians afford the Internet, particularly rural
Georgians and older Georgians often say that broadband is to
the 21st century what electrification was to the 20th century.
And as you watch Washington dally around something so
important, one way of thinking about it is, it's as if we were
wondering whether or not people need electricity. Is it that
fundamental or is it something extra?
So hundreds of thousands of Georgians are about to start
seeing their Internet bills shoot up this month because some of
my colleagues refused to fund this important program.
But the Affordable Connectivity Program is not just a tool
to close the digital divide, as important as that is, and
increase our global connectivity. It's also a health care
lifeline for hundreds of thousands of Georgians, particularly
rural residents, veterans, service members, and seniors across
the country. This is especially true in a state like Georgia.
According to a recent study, military families make up nearly
half of the households that benefit from the ACP.
Mr. Levin, does the ACP help veterans and military families
access critical health care services?
Mr. Levin. There have been a number of studies to
demonstrate that.
Senator Warnock. Absolutely. And in your testimony, Mr.
Levin, you cite two studies, one from the Department of
Veterans Affairs, showing that veterans who use telehealth
emergency services were half as likely to make a costly trip to
an emergency department. So----
Mr. Levin. That's right.
Senator Warnock.--as is often the case, the right thing to
do here is also the smart thing to do. We know that veterans or
anybody having to go to get emergency health care for routine
care, something that could have been arrested earlier, is a
problem not only for that person, but it's not a cost-effective
way for us to manage our affairs.
The other study showed that telehealth access helps save
patients and the Federal Government money, as I point out. It
sounds like the ACP can help both increase access to health
care, while reducing costs, and saving the government money. Is
that correct?
Mr. Levin. That's correct.
Senator Warnock. And so, in that sense, it's a win-win. The
right thing to do is a smart thing to do.
Mr. Levin. Absolutely.
Senator Warnock. That's why I've spent years fighting to
expand access to health care and to reduce costs. And that's
why I continue to fight to cap the cost of insulin at $35 for
everybody. And it's why I will continue to champion the ACP.
All of these things are connected. When people can't stay
connected, it impacts their health care, their overall quality
of life.
Now Mr. Levin, your testimony also notes the similarities
between where Internet subscription rates are low, and where
maternal mortality rates are high. When Internet subscription
rates are low and where maternal mortality rates are high--can
you speak more about the connection between broadband
affordability and maternal mortality? I think that's not
something that people think about every day.
Mr. Levin. Yes.
Senator Warnock. Tell us about that.
Mr. Levin. So I think it's important to remember
correlation does not imply causation. But the FCC mapping
demonstrated, and if you look at the map of maternal mortality
and you look at the map of where not as many people are
connected, there does seem to be a correlation. But that's not
necessarily, again, a causality.
But what's also true is you--and I put this in the
testimony, what people have been able to do, and this is the
innovation cycle we really want to encourage, they have been
using that broadband connection to help pregnant women identify
things before they're really a big problem, to engage in
certain practices that make the birthing safer, and things like
that.
Preventative--this goes to what you were saying earlier,
preventative care is a win-win. But a lot of times people don't
have time to go to the hospital, and therefore a broadband
connection saves them that time, and they're more able, and
there's a greater incentive to do that preventative care.
Senator Warnock. Right, and I appreciate the care with
which you approach this as a scientist that causation and
correlation are not necessarily connected. But it's--but in a
state like Georgia where, again, all these things are
connected, there's connectivity in a whole--in a different way.
In a state like Georgia where we're seeing hospitals close,
some 10 hospitals in a decade, as we've refused to expand
Medicaid, this access, it seems, for people's overall health
care would be critically important.
Mr. Levin. Absolutely.
Senator Warnock. Thank you so very much, and I hope that we
can get this program the funding that it needs to operate.
Mr. Levin. Thank you.
Senator Lujan. Thank you, Senator Warnock.
Next we'll hear from our Ranking Member, Mr. Thune, for
questions.
Senator Thune. Thank you, Mr. Chairman.
Dr. Winfree, in your testimony you discuss the impact that
deregulation has on broadband prices. The current FCC seems
intent on increasing its control and regulating every aspect of
the Internet, most recently with its so-called net neutrality
order. In your experience, what is the impact of highly
regulated sectors of our economy, and what are the practical
effects of the FCC's regulations on broadband prices?
[Technical issue.]
Dr. Winfree. One instance where the Congress stepped in and
nullified a FCC rule, and we saw prices for both wired and
wireless drop pretty significantly. For wireless, dropped 10
percent and for wired, dropped 2 percent.
But, you know, taking a step back and asking what
regulation generally does to prices, I mean, where we see
highly regulated marketplaces, education, health care,
transportation, we tend to see higher prices. So there is a
direct connection between more regulation and higher prices.
And there's a direct connection typically between more
government involvement, even on the subsidy side, and higher
prices.
Senator Thune. So testimony before the Committee today
references data that for every dollar invested in ACP, GDP sees
an almost fourfold increase. How do you respond to the findings
presented in that white paper?
Dr. Winfree. I have looked at the white paper. The co-
authors of the white paper were a geographer at George Mason
University and a high school senior in Fairfax County. And as
a--as an economist, I mean, quite frankly, it's a very
impressive paper by a high school senior. I would love to have
them as my student.
The problem with the analysis is that it relies on what's
called input-output analysis, which assumes that there is no
change in a policy response on behavior. This is something that
economists have known has been a suboptimal way to model things
since the late 1970s.
As a matter of fact, there was an economist at the
University of Chicago, Bob Lucas, who won the Nobel Prize in
1995 for suggesting and showing that this kind of analysis has
major, major challenges.
So you know, I think that there are better ways to do this,
but I would take the one-dollar-for-four-dollars with a grain
of salt.
Senator Thune. And that--they used a static model? Is that
essentially what you're saying?
Dr. Winfree. It does use a static model, but the--again,
sort of taking a step back, one of the main assumptions that it
makes is that ACP doesn't actually exist. And all we're doing
is adding ACP on top of an economy without modeling any of the
behavioral impacts that ACP might have, including on prices,
which is one of the main components of my research, looking at
the effect that ACP has on prices.
The other thing that it doesn't do that's important, and I
mentioned this earlier, is that for every dollar that we're
spending right now--so since the beginning of 2020, 76 percent
of all new spending since the first quarter of 2020 has been
funded by a debt. By new bonds, treasury bonds. Fourteen
percent through money creation. Only 7 percent has been paid
for with revenue.
That's one of the reasons why we're seeing interest
payments on the debt skyrocket, and interest rates skyrocket.
So for every dollar that you borrow to spend on something,
you're paying 5.5 percent interest that rolls over on a 3-month
basis, just given how Treasury has had to manage its debt
management over the last couple of years.
So that's one of the reasons why we're seeing inflation,
and you need to take something like that into account if you're
projecting the impacts of any program, ACP or any program, on
economic growth.
Senator Thune. Right. And it is a dynamic economy, which is
why there are a lot of interactions, and----
Dr. Winfree. That's right.
Senator Thune.--those have to be mapped out as well. It
seems like this was a fairly isolated study.
Similarly, Chair Rosenworcel has been pushing an ACP,
quote, ``Fact Sheet'' that states that, and I quote, ``More
than three-quarters of respondents say losing their ACP benefit
would disrupt their service by making them change their plan or
drop Internet service entirely,'' end quote. Is this actually
what the FCC's survey data reveals, in your view?
Dr. Winfree. So I think there are two issues here. The
first issue is, what does the survey data show?
And then the second issue is, is this survey something that
we can rely upon? And this is actually following up on
something that Ms. De Wit mentioned a few moments ago with in
regards to making sure that we're getting the right information
out of FCC to make policy decisions.
So if you take the FCC's data as gospel, then it shows that
only 15.7 percent of folks will lose broadband coverage if ACP
goes away. Now the problem is, is that the way the survey was
conducted is they went out to 110 households, and only 5,300-
and-some households responded to the survey.
Now OMB says that when your survey response rate is under
70 percent, which is much higher in this case than the 5,300-
and-some-odd households, you have to have a methodology, a new
methodology, for addressing that non-response rate.
And so FCC didn't do that. And that's one of the challenges
that I have as an economist and somebody who looks at
government survey data on a regular basis. I don't even know
how to read this survey. Like I--you know, it might be
representative, it might not be representative.
The reality is that we just don't know, and we shouldn't be
passing it along as if it is representative. Rather, we should
ask FCC, and potentially fund them, to go collect more and
better data on the program.
Senator Thune. Thank you.
Mr. Chairman, my time has expired. Let me just close by
saying there has been some discussion today, too, about the
BEAD program. Our telecom producers--or telecom providers were
in town this week, and this is the co-ops, the independents,
those that serve the most rural areas of South Dakota.
And there isn't a single one of them that can use the BEAD
program. And the reason is because of all the conditions and
rules and regulations that the administration attaches to the
program, many of which are completely unrealistic for the kind
of service that these folks provide in rural areas of the
country.
So sometimes getting more government involved in some of
these issues ends up not being a good solution. It ends up
making matters worse. Thank you.
Senator Lujan. Thank you, Mr. Thune.
Mr. Tester, you're recognized for your questions.
STATEMENT OF HON. JON TESTER,
U.S. SENATOR FROM MONTANA
Senator Tester. Thank you, Mr. Chairman.
I want to thank all the folks who testified for being here.
I'm going to start with you, Dr. Winfree. I believe in
capitalism. I'm sure you do. I believe in competition in the
marketplace. Broadband is kind of a little different situation
in that, number one, if we--and maybe this is--you can disagree
with me if you want.
I think the private sector doesn't necessarily interested
in laying broadband into rural America and places like I live
where the nearest neighbor's a mile away. And I live in a place
that isn't the end of the earth, truthfully.
But the question is, is that so we put money into an
infrastructure bill to help these companies lay broadband. We
didn't want broadband to be laid over existing broadband
because then that's a waste of money. So that competition, that
competition issue goes away.
The question I have is it doesn't do any money to lay
broadband if people can't afford it. Just doesn't do any good.
How do we make it affordable? If not with this program, how
do we make it affordable when especially in rural areas where I
still have folks that don't have any Internet service
whatsoever, they don't have fiber, they ain't got nothing. They
got a phone. That's it. And they probably like it that way, by
the way.
But how do we make it affordable? If not with this program,
how do we make it affordable, when in fact there isn't the
competition in the marketplace that there normally would be to
help drive down prices and give the consumer an honest value
for their product?
Dr. Winfree. I mean, that's a great question. I mean, as I
mentioned earlier, given the state of the economy that we're
in, I think that there are major problems with subsidizing
demand. I don't think that those same problems exist in
subsidizing supply.
And so take BEAD, right? So we've talked a little bit about
BEAD today. You've got 20 states that have already come out and
said that they want to use their BEAD funds for non-deployment,
right?
Which tells me, given that broadband deployment was sort of
central to the BEAD program, that those initial allocations
might not have been exactly right. Right?
Senator Tester. Yes.
Dr. Winfree. So I think, you know, we need to think about
like what to do on that side.
I would also encourage folks to go look at the State and
Local Fiscal Recovery Funds. So in ARPA, there were $350
billion in state and local funds. Of the $350 billion, there's
still $70 billion remaining that has not been obligated by
states and local governments. The Biden administration has been
pushing this on states and locals. They've been pushing it on
nonprofits to go try to encourage people to think outside the
box.
One of the problems with the SLFRF money is that in order
to spend it, you have to allocate it to one of seven
categories. If one of those categories are infrastructure or
broadband or housing or anything where you're actually building
something----
Senator Tester. Yup.
Dr. Winfree.--you have to fill out more paperwork.
And so what the states and locals are doing, is that
they're channeling it all into what's called revenue
replacement, or negative economic impact. Right? Which I think
has led to an overspending on those categories, and an
underspending on critical infrastructure.
And so that's--I would think sort of creatively about how
to get some of those capital investments involved.
Senator Tester. OK. So we do a lot of things here.
Military, for example, we give an increase for housing
allowance. OK? BAH, they call it. And what happens many times
when we announce we're giving an increase for housing
allowance, guess what happens to people who are renting the
hood? Yep, they jack it up before they even get it.
So it's a net zero, and sometimes even worse.
Is there any way--and I'll stick with you, Dr. Winfree, not
that the other guys aren't a lot of fun because you are, but is
there any way when we have a subsidy program, and I'm in
agriculture so I know what subsidies are all about, is there
any way when we have a subsidy program to hold--particularly
the big companies. I really--I'm a rural guy, and I don't think
the rural co-ops are doing this as much, but the big companies
tend to get what you can get out of the marketplace, and if
that subsidy goes up, they'll jack their rates. Is there any
way to stop that?
Dr. Winfree. That's exactly what my research finds, right?
And part of the reason why my research finds this is that ACP
is, as I mentioned earlier, is predominantly a program that
serves urban areas relative to rural areas, when rural areas
have a completely different challenge.
Senator Tester. Yes, they do.
Dr. Winfree. Yes. And I mean, I'll just--I'll give sort of
my own example. I have a--my sister lives in the Middle
Peninsula in Virginia, which is a really rural farming
community between the peninsula and the Northern Neck, and they
don't have many options there. Mobile doesn't work very well
because you're close to the Bay. Fixed wireless doesn't work
very well. And they've received a lot of money from the state,
that region, to build fixed wire, and it's--it's now there. And
it's--it's actually fairly, fairly cheap, right?
But they have one option. And it's fairly cheap for the
buy-in. At some point, those folks who have then bought into
those plans are going to have their rates increased if there
isn't competition.
And so I think what we need to do is ultimately focus on
supply, ultimately focus on competition, and that's what will
bring those rates down in a sustainable way at some point into
the future.
Senator Tester. I--and I'm over time, and excuse me if I
might.
I understand----
Dr. Winfree. It was my fault.
Senator Tester.--and I--no, no, no. I agree with you
fundamentally, except it is so damn expensive to lay broadband,
and in rural America, I don't know how you're ever going to get
competition. I just don't know, unless we're willing to lay
several lines or--God, I don't know, you guys probably make
rules that force other companies to be able to use the lines or
whatever. There are all sorts of stuff out there.
But I just don't know how we--in, you know, in a grocery
store, yes, we get more food manufacturers. In energy, we'll
get more people that are creating energy, whether it's, whether
it's carbon-based or--or renewable. There are things we can do
in those.
In this one, it's just a different marketplace that
somewhat holds the consumer at a big disadvantage.
You don't have to say anything, but I had to get that off
my chest. Thanks.
Senator Lujan. Thank you very much, Senator Tester.
Senator Markey, you're recognized for questions.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Yep. Thank you, Mr. Chairman.
I agree with everything Senator Tester just said.
I also want to take a moment to celebrate the FCC's vote
last week to reinstate critical net neutrality rules. The new
rules are important to protect the free and open Internet, and
the evidence shows clearly that the rules do have no impact on
broadband investment in the country. So just congratulations to
the FCC.
As everyone knows, we're at a crisis point for the
Affordable Connectivity Program. May is the first month when
ACP households will not receive the full $30 discount on their
monthly broadband bill. Instead, that discount will only be
$14, which is less than half of the subsidy. For households on
tribal lands, the May benefit is just $35, down from $75
previously.
And I'm deeply concerned that faced with this cost
increase, many ACP beneficiaries will drop their Internet
service, and that would be a huge loss. That is why last week I
led my colleagues in a letter to the trade associations of the
major ACP corporations and urged them to cover the shortfall in
the May benefit.
Given that the $14 billion in ACP benefits ultimately
returns to the corporations, who are the providers, this money
is a small price to pay for ensuring that ACP households
receive a full discount in May.
Mr. Levin, do you agree that providers should ensure that
ACP households receive the full $30 benefit in May?
Mr. Levin. I certainly hope that they follow your advice
and do that.
I would only add to that that voluntary efforts are not a
long-term solution. We need a long-term solution. I was very
supportive, as you know, for issues--for initiatives like
Comcast Internet Essentials and other kinds of things, very
helpful. But it was not a solution to get everybody on, which
is what we really need.
Senator Markey. Yes. So the corporations should help us to
create a bridge here to combine a solution.
Mr. Levin. Bridges are good.
Senator Markey. They get the primary benefit financially
out of this. And we just have a short window to get these--to
get this solved, and we just don't want these households to
lose their critical benefits.
And as we consider proposals to reform the Universal
Service Fund, we must make sure to protect existing programs
that have been instrumental in closing the digital divide.
At the top of that list is the Universal Service Program
for Schools and Libraries, better known as E-Rate. So I was the
Democratic author of the E-Rate program. I actually named it
the E-Rate program. I was going to call it the Ed-Rate----
[Audience interruption.]
Senator Markey.--but then my staff said, ``Nah''----
Mr. Levin. I remember that.
Senator Markey. --``We can't do that.''
OK, we'll just call it the ``E-Rate,'' for ``education.''
So I did that in 1996. Named it, created it.
And so the program has delivered over $60 billion to
connect schools and libraries to the Internet, including $900
million for Massachusetts. And that money has primarily flowed
to disadvantaged and low-income communities across the country.
So Mr. Levin, you were there in 1996----
Mr. Levin. As were you. Yes.
Senator Markey.--at the FCC to implement it. Do you agree
that any changes to the Universal Service Fund must protect E-
Rate?
Mr. Levin. I certainly agree that it should protect E-Rate
and the mission of E-Rate. I would just note, because I think
it's important, you know, you and I have both aged a little
bit. I think we may be the only people in this room who were
there----
Senator Markey. Speak for yourself.
Mr. Levin.--in 1996.
[Laughter.]
Mr. Levin. I was going to say, you have aged much more
gracefully and much more beautifully than I have. But the E-
Rate program has also aged extremely well.
But we did have to do some reforms, and I think the FCC's
reforms were in 2014. And those reforms were great. And if you
look at the Education SuperHighway report in 2019, you can see
that the reforms led to a number of tremendous improvements for
the state.
So I--we should absolutely protect E-Rate. We should
absolutely protect its mission. But I would be open to, you
know, things that make it even better.
So that is the challenge.
Senator Markey. Right.
Mr. Levin. ACP is part of a broader mission to make sure
that everybody is connected to the tools they need, as Congress
said, to fully participate in the economy and society.
Senator Markey. Yes. So it's actually--it's not your age,
it's the age of your ideas. So I like to think of myself as
still the youngest guy in the room.
So E-Rate has stood the test of time. You know, if it can
be improved, that's fine, but it's survived the test of time.
Mr. Levin. Yes.
Senator Markey. So any changes must be carefully calibrated
to elicit a solution that actually improves it and doesn't
undermine it.
And ACP is exactly the kind of program that does show how
government and industry and community organizations can all
work together.
Mr. Levin. Mm-hmm.
Senator Markey. And we just have to continue that tradition
and ensure that as we move forward, we do so with a consensus.
And we just want to keep this program going, because if it
fails, it just will undermine public trust, because it will
just be a failure on the part of the government and the private
sector to come to a solution that helps community organizations
provide that service.
And thank you, Mr. Chairman and Ranking Member, for all of
your great work on this program. Thank you.
Senator Lujan. Thank you, Senator Markey.
Senator Rosen, you're recognized for questions.
STATEMENT OF HON. JACKY ROSEN,
U.S. SENATOR FROM NEVADA
Senator Rosen. Well, thank you, Chairman Lujan, of course,
Ranking Member Thune. It's really important we hold this
hearing today.
And I thank all the witnesses for being here.
Because earlier this week, we crossed a new threshold. The
end of April marked the last month that households will see, of
course, as everyone has stated, the full $30 ACP benefit on
their internet bills.
I was proud to help write and pass the broadband section of
the Bipartisan Infrastructure Law, which created the Affordable
Connectivity Program to lower Internet costs for Nevadans and
people across the country.
But due to congressional inaction, there are people today
already seeing higher costs because the program's funding has
run out. I remain committed to finding a path forward to save
ACP to ensure high speed Internet is not only accessible, but
affordable to working families in Nevada. And the time has run
out. And that means the time to act is now.
And so I want to talk a little bit on some of the impact
for my Nevada seniors and my Nevada veterans. I want to hone in
on one of the points Senator Vance made earlier. Losing access
to Internet due to high costs can also raise costs, like I
said, for seniors, for veterans, and even the Federal
Government.
Federal agencies like the VA and Medicare use telehealth
and online services to save taxpayer funds and provide more
timely assistance to veterans and seniors.
Telehealth. I can't tell you how important it is to people
in our rural communities in rural Nevada. It matters. It makes
a difference. They're getting their care this way. It's saving
lives.
But sometimes the nearest in-person service is hundreds of
miles away.
So Mr. Levin, on my ACP lapsing, they get harder for
veterans to access their benefits, and especially when they go
through the VA.
Mr. Levin. It does it in a variety of ways. One of the
interesting things that's been developing in the last few years
is because of ACP, there are a lot of social service providers,
both in the government but also in the non-profit communities,
that are restructuring the way--they now have an incentive to
restructure how they deliver those services to make it more
effective, more efficient, to allow people to get help 24/7
instead of 9 5.
So it can affect veterans who depend on a variety of
government services, not just with health care, though health
care is probably the number one way.
But if they get cut off, if they can't afford Internet
connectivity, then everything they do to try to make their
lives better will become more difficult.
Senator Rosen. Yes. I think the same thing would go for our
seniors and for many of our social service agencies that work
all around our state.
So Mr. Chairman, I'd like to enter into the record a letter
from health plans across the U.S. in support of continuing to
fund the ACP.
Senator Lujan. With no objection.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Rosen. Thank you. I'm going to move on and talk a
little bit in the time left about broadband multipliers. So
research has identified broadband adoption as a super
multiplier.
What does that mean? Just like we talked about, it
increases access to health care, creating more opportunities
for tele-education and for jobs and--well, I would say in
Nevada for tourism as well.
And so Mr. Levin, how can you talk about the downstream
effects of broadband affordability? How is affordable access to
the Internet connection as for better educational outcomes,
health outcomes, better jobs, just increase all of our
connections and our ability to move all around our state,
particularly in our underserved and rural areas? And this lapse
in ACP, how does it reverse those benefits?
Mr. Levin. Yes. I think you've hit upon a key point here,
which is, as I mentioned in the oral testimony, broadband
Internet access is really a general-purpose technology. It is
like electricity, as Senator Tester was saying, in the sense
that it doesn't enable one thing. It enables lots of things.
And so all of those things that you mentioned are improved.
Earlier we were talking about job training and job placement.
Now by the way, again, artificial intelligence is going to
change the way people do jobs, change the way that they have to
keep learning and learning.
You're not going to do that by, you know, going to
community colleges live all the time. You're going to do it at
home at night. You're going to keep upgrading your skills.
And then how do you find that job? The majority of jobs,
the vast majority of jobs, are now posted only online.
Senator Rosen. Mm-hmm.
Mr. Levin. So that's a benefit to everybody. But that's
just one of a thousand examples we could use.
Senator Rosen. Well, thank you. I have so much more to talk
about our impact in rural communities and infrastructure
investments that--how we're going to expand the digital divide
if we don't fund ACP, and just create more and more inequities.
I will submit those questions for the record. I see my time is
up.
Thank you.
Senator Lujan. Thank you, Senator Rosen.
And before I close with no other speakers expected, I have
a couple other questions. Ms. de Wit, in your work at Pew,
you've assisted states in determining what constitutes
reasonable prices for broadband for a middle class family,
correct?
Ms. de Wit. Yes, that is correct.
Senator Lujan. Now, it's my understanding that your work
found that affordability can vary widely across regions,
states, and counties. For example, the median affordability
price for Texas is listed at $92.80. In Dimmit County in South
Texas, the affordable baseline was $41.67. And in Rockwell
County, located in the Dallas-Fort Worth Metroplex,
affordability was $185.99.
Ms. de Wit, what are some of the reasons for such wide
pricing differences in different states and counties?
Ms. de Wit. Simply put, more research is needed to confirm
that. What we know at this point are that there are a range of
factors that do influence affordability, including the type of
service that is available, as well as, simply put, what a
customer can afford.
And further, that research, which I should point out, is
based on a 2 percent valuation of middle income. And sorry, I
won't go down on methodology. You don't need to hear about
that.
But I think what's important to note is that what we found,
even with those ranges, are that that middle, that 2 percent
number of what could be affordable for a middle class, is still
more expensive than what many families can afford.
But fundamentally, there are a range of economic, social,
and educational factors that influence affordability for
households.
Senator Lujan. Appreciate it.
Senator Hickenlooper, you are recognized for your
questions.
STATEMENT OF HON. JOHN HICKENLOOPER,
U.S. SENATOR FROM COLORADO
Senator Hickenlooper. Thank you, Mr. Chair.
Thanks to all of you. I've caught bits of this through the
morning.
Let me start with a question for Ms. Case Nevarez. During
the pandemic, students nationwide had to adapt to learning
remotely. Many had limited experience beforehand. Students
without any broadband connection, or a device, were
disadvantaged, could not keep up with their peers. I think the
digital divide is not just about broadband access, but about
broadband adoption and use.
So can you describe how you've seen this relationship
between broadband adoption and education evolve over the last
couple of years?
Ms. Nevarez. Sure. In our state in particular, it has been
a critical issue that the Nation is watching. Community
members, particularly our tribal community members, Hispanic
community members, some of our disabled community members, have
actually gone to the state to address equality of education.
And a tech order came out to note the importance of technology
and the critical need for our students to actually have both
connectivity and a device.
Our state is rallying now to address those needs, and it is
not easy. The cost of devices, the cost of maintenance of
devices, and of course, as we've mentioned here today,
connecting many of our rural students--some of which actually
in Navajo Nation, believe it or not, ride the bus 2 hours to
get to school every day.
So as we've noted, in our state, getting fiber to a home
that far away over canyons and mountains is expensive, and the
cost, if there even is a choice, is expensive. We sit here in
D.C., there's 11,000--more than 11,000 people per square mile.
In the state of New Mexico, it's an average of 17.
So even if a family wants their student or wanted their
student to be able to connect, it's often not an option, or
it's an expense they can't handle.
It has cost our students, many of them returning to school
post-pandemic, the challenge of catching up and the challenge
of proceeding forward as we as a state look at how are we going
to ensure all students, all the time, have technology and
access as a tool for learning and advancing. It's a heavy lift
for us, and a heavy lift for every state, but a lift we cannot
delay and we cannot avoid.
Senator Hickenlooper. Right. Thank you. And I've got two
more questions, so hopefully we'll get them. I'll be concise in
asking and--because you can get concise answers.
Ms. de Wit, the E-Rate Program, the LifeLine Program, the
Rural Health Care Program to support hospitals and clinics,
the--what they call the High-Cost Program to help expand access
in rural America, during the pandemic, Congress authorized
these programs to get to the same goals as the Universal
Service Fund through direct appropriations and unique
appropriation rules.
How would you advise Congress to combine these pandemic-era
programs with the Universal Service Fund to be sustainable
long-term?
Ms. de Wit. At this point, we don't have research on that
issue to provide an informed answer. What we do know is that
USF reform is needed. That's also a question that is worthy of
debate and further research, and which we would be happy to
participate in as time moves forward.
But I think the critical point for us is that ACP is the
cornerstone of BEAD. And without ACP, without a bridge for
funding ACP, we threaten billions in deployment grants across
the country. So we hope that we find a short-term solution for
ACP and a longer one for USF reform.
Senator Hickenlooper. We'll get you back to work. Full-time
employment for researchers, this issue.
Mr. ``L'vin''--or ``Levvin,'' I missed the beginning
introductions. It's like ``Hickenlooper,'' ``Hickenlopper,''
either way.
That same question. We're looking at--I mean, the issue of,
as I grew up, everyone paid in a little bit into a fund to make
sure that everybody had telephone coverage and was connected.
We've introduced something called Reforming Broadband
Connectivity with Senators Klobuchar and Thune, finally trying
to get the FCC to take action, you know, by basically expanding
the contribution base to make sure that we have sufficient
resources.
So in your view, what is currently within the FCC's
authority to expand the contribution base to, like broadband
providers? And what is not within their authority without
congressional legislation?
Mr. Levin. I think they could expand it to broadband
providers. I don't think they could expand it to certain kinds
of big tech operations, as has been proposed by a number of
different people.
And I would be happy to also participate in any further
discussions. I was involved in the 1990s. I was involved 10, 15
years ago in terms of various reforms. There's no question that
there's a broader reform necessary.
But the single most important point that I think this
hearing demonstrates is, we need to keep everybody on. The
government actually saves money by keeping people on. So let's
have a short-term extension, and let's get to the work. This is
not the Middle East. We can solve this problem. And we can
solve it in a reasonably short period of time. And we should
look at a lot of different options for how to do it.
I might note there are some court cases pending that may
affect those options.
Senator Hickenlooper. Sure.
Mr. Levin. But I think fundamentally, this is a
congressional decision. And it should be a congressional
decision. And let's make that decision. Let's move on. And then
15 years later, there'll be another hearing, and we'll have to
reform it all over again. But that's fine. Because that's the
truth of every program that's ever occurred.
Senator Hickenlooper. Well, I appreciate that. And I look
forward to keeping you all busy in the years to come, because
it is important. And it--I have not had a single citizen while
the 8 years I was Governor of Colorado, who when explained the
theory behind everyone paying a little bit more to make sure
that everyone had some access, no one ever complained about
that.
So it is befuddling, to say the least, that we can't seem
to find out that that solution is sitting there right in front
of our face.
Anyway, I yield back to the Chair.
Thank you all.
Senator Lujan. Thank you, Senator Hickenlooper.
And I'm asking the Committee to submit a statement for the
record from R Street, which is a self-described ``center-right
think tank'' that engages in policy research in support of free
markets and limited effective government without objection.
[The information referred to follows:]
R Street Institute
May 1, 2024, Washington, DC.
Hon. Ben Ray Lujan,
Chair
Subcommittee on Communications, Media and Broadband,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Hon. John Thune,
Ranking Member,
Subcommittee on Communications, Media and Broadband,
Committee on Commerce, Science, and Transportation,
United States Senate,
Washington, DC.
Dear Chair Lujan, Ranking Member Thune, and members of the
subcommittee:
Thank you for your decision to hold a hearing on May 2, 2024,
titled ``The Future of Broadband Affordability.'' My name is Jonathan
Cannon, and I am Policy Counsel on the Technology and Innovation team
at the R Street Institute. The R Street Institute is a non-partisan
think tank dedicated to free markets and limited, effective government.
One of our priorities is to seek solutions to address broadband
challenges and to lower barriers to help Americans seize the
opportunity of the digital economy. To that end, we would like to
reiterate our support for the Affordable Connectivity Program and work
with this subcommittee to find a long-term sustainable path for the
extension of this important program.
Prior to joining the R Street Institute, I was an attorney advisor
in the Office of Legislative Affairs at the Federal Communications
Commission (FCC) in 2020 when the Emergency Broadband Benefit Program
was started by the CARES Act.\1\ I saw how quickly and effectively
Congress and the FCC mobilized to implement this program and connect
those left on the wrong side of the digital divide during the COVID-19
pandemic. The program's success was so evident that it was extended as
the Affordable Connectivity Program (ACP). This has been a bipartisan
program since its inception, and it should remain so moving forward.
---------------------------------------------------------------------------
\1\ H.R. 133, 116th Cong.
---------------------------------------------------------------------------
The ACP is a light-touch, market-friendly broadband affordability
program that has enabled 23 million households to connect and stay
connected online. The program can be updated and modified by Congress
to account for changes to both customer needs and market demands.
Ultimately, the goal of the program is to help families get off of ACP
and become an integral part of our digital economy. So far, the data to
that effect looks promising.
As R Street analysis has highlighted on several occasions, the ACP
is ``a model of success.'' \2\ The ACP addresses the affordability gap
enabling existing customers to remain connected, while also helping
customers connect to the digital economy for the first time. There are
currently over 23,000,000 households in the U.S. enrolled in ACP.\3\
These households are using the technology-neutral voucher to receive a
$30-per-month discount for either mobile, fixed, fixed wireless, or
even satellite.\4\
---------------------------------------------------------------------------
\2\ Jonathan Cannon, The Affordable Connectivity Program: When
Government Spending is Good, R Street Institute (Apr 19, 2023), https:/
/www.rstreet.org/commentary/the-affordable-connectivity-program-when-
government-spending-is-good/
\3\ Additional ACP Data, Universal Service Administrative Company,
https://www.usac.org/about/affordable-connectivity-program/acp-
enrollment-and-claims-tracker/additional-acp-data/ (last visited Apr.
30, 2024)
\4\ Id.
---------------------------------------------------------------------------
Although we recognize that there are genuine concerns with the ACP,
we do not see these as fatal flaws of the program. Instead, we see
these concerns as an opportunity to further refine and improve it. Some
have raised concerns about the ACP's negative impact on the
marketplace, but all evidence demonstrates the opposite. According to
recent studies, the most popular broadband speed tier plan prices
dropped by 18.1 percent during ACP implementation.\5\ ACP is a
bootstrap program that connects families to the digital economy and its
results speak for itself.
---------------------------------------------------------------------------
\5\ Arthur Menko, 2023 Broadband Pricing Index Broadband Prices
Continue to Decline, USTelecom https://ustelecom.org/wp-content/
uploads/2023/10/USTelecom-2023-BPI-Report-final.pdf (last visited Apr.
30, 2024).
---------------------------------------------------------------------------
A prevailing concern raised by critics of the ACP is that the
program is subsidizing providers, and providing limited, if any,
benefits to customers. Fortunately, studies disprove that notion.
Recently-published research found that not only do Internet Service
Providers (ISPs) pass cost savings on to their customers, but they also
are ``not inflating prices to appropriate government subsidies, and the
ACP is successfully reducing the cost of Internet plans for eligible
households.'' \6\
---------------------------------------------------------------------------
\6\ Schieberl, River and Ahmadi, Nikki, Measuring the Success of
the Affordable Connectivity Program (July 31, 2023) https://ssrn.com/
abstract=458690 or https://dx.doi.org/10.2139/ssrn.4528690
---------------------------------------------------------------------------
The purpose of the study was to determine ``if there is a
statistically significant difference in the price of an Internet plan
when the ISP offers enrollment into the Affordable Connectivity
Program.'' \7\ The study revealed that the cost of an Internet plan
when offering enrollment into the ACP decreased by $3.27, not including
the $30/$75 discount offered by the program.\8\ Notably, the study
concludes that providers ``are passing on cost savings to their
customers . . . and the prices are not being artificially raised to
appropriate government subsidies.'' \9\
---------------------------------------------------------------------------
\7\ Id. at 4
\8\ Id. at 5
\9\ Id. at 7
---------------------------------------------------------------------------
Some have written critiques of the program that appear at first
blush to contradict the results of this paper and study.\10\ However,
this analysis fails to compare the price of both fixed and wireless
broadband services. With the majority of ACP recipients utilizing the
benefit for mobile broadband, the data looks at only fixed broadband
when making the determinations about costs. It further admits to using
a small dataset and it is not clear whether the results hold as the
percent of the population receiving ACP benefits increases. This
critique does not examine the ACP program in comparison to alternative
efforts to expand broadband access. The ACP program fares well by
comparison and is less intrusive, and less likely to distort the
broadband marketplace.
---------------------------------------------------------------------------
\10\ Bidenomics Goes Online: Increasing the Cost of High-Speed
Internet, Paul Winfree, Economic Policy Innovation Center, https://
epicforamerica.org/publications/bidenomics-goes-online-increasing-the-
costs-of-high-speed-internet/
---------------------------------------------------------------------------
With the large variability of service price offerings and prices
across the country, a small sample is hardly a good predictor of the
cost of services. Another critique of the program in the paper is the
lack of new subscribers. This further undercuts the argument. If the
program were only supplementing existing customers with a neutral
voucher, it is unlikely that would have any impact on the market or the
cost of broadband services.
During the COVID-19 pandemic Internet demand exploded, and
providers not only met that demand, but were able to reduce prices,
offer faster speeds, and keep Americans connected.\11\ Broadband prices
have decreased by 42 percent since 2016, including by as much as 60
percent on the highest-speed plans. And that's to say nothing of the
increase in speeds available to customers.\12\ With the overall trend
of broadband prices decreasing over time, as noted in several studies,
there is stronger evidence to suggest that ACP has at least done little
to manipulate the market broadband prices. If anything it has done
little to effect the trend of faster speeds at lower price points.
---------------------------------------------------------------------------
\11\ COVID-19 Overview, NCTA, https://www.ncta.com/covid-19-
overview, (last visited, apr. 30, 2023)
\12\ New Study: U.S. Broadband Prices Fell 42 percent Since 2016,
Roslyn Layton, Forbes (Feb 28, 2022), https://www.forbes.com/sites/
roslynlayton/2022/02/28/new-study-us-broad
band-prices-fell-42-since-2016/
---------------------------------------------------------------------------
Unfortunately, the ACP, like many Federal programs, has been the
victim of arbitrage and subject to waste, fraud, and abuse.\13\
However, the FCC's Office of Inspector General has readily identified
and addressed these issues. For example, in September of last year, the
IG completed an investigation that led to providers voluntarily
repaying $49.4 million that was improperly used.\14\ As Congress looks
to extend and reform the ACP program, they are well suited to continue
to refine and strengthen it to reduce opportunities for waste, fraud,
and abuse.
---------------------------------------------------------------------------
\13\ John Thune, Thune Cruz Statment on the FCC's Mismanagement of
a Taxpayer Funded Broadband Subsidy Program (Jan 25, 2023), https://
thune.senate.gov/public/index.cfm/2023/1/thune-cruz-statement-on-the-
fcc-s-mismanagement-of-a-taxpayer-funded-broadband-subsidy-program
\14\ FCC Inspector General Announces Major ACP Provider Voluntarily
Repaid Nearly $50 Million and Issues Advisory Regarding ACP Provider
Compliance with Program Usage Rules, Federal Communications Commission
(Sept. 28, 2023), https://docs.fcc.gov/public/attachments/DOC-
397332A1.pdf
---------------------------------------------------------------------------
As we highlighted in comments submitted before the Universal
Service Working Group, ``Before any long-term solution is considered,
Congress should at least ensure a short-term extension of the ACP,''
which would provide Congress an adequate opportunity ``to examine the
program's eligibility criteria to potentially lower the cost of the
benefit and ensure that the ACP targets customers who depend on it to
remain connected.'' \15\ Congress is in the perfect position to ``make
meaningful changes to ensure [ACPs] longevity and sustainability.''
\16\ As Congress looks to extend the ACP, Congress should consider
rolling it into the future Universal Service Fund (USF) programs.
---------------------------------------------------------------------------
\15\ Jonathan Cannon, Comments to the Senate Universal Service
Working Group (Aug. 15, 2023) https://www.rstreet.org/outreach/r-
street-submits-comments-to-senate-universal-service-fund-working-group/
\16\ Id.
---------------------------------------------------------------------------
Senator Cruz, in a recent whitepaper, noted that ACP and Lifeline
``should be streamlined and reformed to target subsidies to those who
truly need them to get online.'' \17\ As his paper highlighted, the
Government Affairs Office has identified 133 broadband programs across
15 agencies.\18\ There is an enormous mission creep across government
agencies that needs to be addressed to ensure that we are maximizing
every dollar spent on broadband and taking steps to close the digital
divide. While both Republicans and Democrats are rightfully frustrated
by the significant cost and duplicity of Federal broadband programs,
they are in a perfect position to meet these challenges head-on,
consolidate existing broadband programs, and prioritize ACP as ``one
broadband program to rule them all.'' \19\
---------------------------------------------------------------------------
\17\ Ranking Member Ted Cruz, Protecting Americans From Hidden FCC
Tax Hikes, Blueprint for Universal Service Fund Reform https://
www.commerce.senate.gov/services/files/5CA218F4-384D-4DCA-8678-
6885885209DC (Last visited Apr. 30, 2024).
\18\ Government Accountability Office, Broadband: A National
Strategy Needed to Coordinate Fragmented, Overlapping Federal Programs,
GAO-23-106818 (2023).
\19\ Jonathan Cannon, The Conservative Case for the Affordable
Connectivity Program, R Street (Sept. 2023) https://www.rstreet.org/
events/the-conservative-case-for-the-affordable-connectivity-program/
---------------------------------------------------------------------------
Thank you again for holding this important hearing and for your
consideration of my views. Should you have any questions or wish to
have further discussion, please do not hesitate to contact me.
Sincerely,
/s/ Jonathan Myles Laurier Cannon,
Policy Counsel Tech and Innovation,
R Street Institute.
Senator Lujan. The study also state something that I agree
with, which is R Street states that the Affordable Connectivity
Program is, quote, ``a model of success,'' and that, quote, has
been a bright--pardon me, quote, ``has been a bipartisan
program since its inception, and it should remain so moving
forward.''
I would also like to highlight research that R Street
Institute statements mentions, which takes a look at the effect
ACP has had on the price of broadband, by comparing broadband
price offerings by companies who participate in ACP with
similar offerings by companies who do not participate in ACP.
The study demonstrates that ACP is successfully reducing
the cost of Internet plans for eligible households. The study
also finds that ISPs are passing on cost savings to their
customers.
Mr. Levin, yes or no, in any of your research, have you
seen evidence that the ACP itself is driving broadband prices
higher? I appreciate that very much.
Mr. Levin. On Wall Street right.
Senator Lujan. I appreciate that.
And look, I hope that these programs will eliminate slow
speeds across America. I live in a rural community. I represent
a very rural state. Most access to the Internet is still over
twisted copper. I was a former utility commissioner before I
came to the Congress.
So doing something about POTS, and that's not what
everyone's trying to legalize now, that's Plain Old Telephone
Service----
[Laughter.]
Mr. Levin. Right.
Senator Lujan.--which was delivered over twisted copper,
and then some really smart engineers figured out, well, we can
increase capacity on twisted copper. And then the world said,
and all these corporations said, ``Oh, that's how people living
in rural America will get faster speeds.'' You know, ``We're
going to boost them up from a dial-up tone,'' and some of you
in the room may remember it, but you don't have the same color
of hair as I do.
But you used to go to download an e-mail, not all your e-
mail, an e-mail, and you would log in to AOL or whatever
account you had, and you would hit enter, and the phone would
start, ``buzz, buzz, buzz,'' you know, and everything would
start talking to one another, and you'd leave. For the day. And
you would come home to watch it maybe finally downloading the
one e-mail.
Unfortunately, that's how broadband providers across the
world said, ``Rural America, that's what they get.''
We're going to solve this problem. Building a bipartisan
deployment plan to rural America said, ``Well, not anymore.''
In the same way that my colleagues asked about electricity, and
roads, and this revolution across America to say that everyone
matters, we're going to make sure that we get this done all
across the country, we're finally doing the same thing with
broadband.
Dr. Winfree, the one area that I disagree--well, there may
be a few areas. The one area that I'll highlight, ACP does help
rural America. Things in rural America are expensive too. I
hope more programs look to rural America, where most of our
food is grown.
There's an effort now to be smarter with the use of
tractors, like the ones that my colleagues that farm on large
acreage, to modernize them. You know, I still use the ones that
you have to putter around in because it's small acreage. It
doesn't make sense for me.
Rural electric co-ops are a present service to us across
the country, because people believed that rural Americans
deserved electricity too.
And I'm certainly hopeful that with these programs that we
can eliminate slower speeds, that we can finally get higher
speed connectivity to people living all across America.
And where competition doesn't exist, well, then what? I
don't know if I'm hearing that we should overbuild. I'm
surprised I used those terms, because I don't use those terms.
I don't know what ``overbuild'' means.
In order to get competition for broadband, you need a few
pipes, or you need a lot of fiber in a pipe, so that other
people can be able to get that service to you.
Well, that's called overbuilding. They used to call it
``gold plating'' when I was on the Public Utility Commission.
And it was all the rural telephone cooperatives who would get
called out for gold plating.
And now we applaud them for being smart and innovative and
making these investments. Where you had innovative boards, they
had some of the fastest connections in America. We should model
after them. We should look after what they've been able to
achieve.
So I'm just going on and on here. I hope that we can find a
way to work together as the bipartisan working group with USF
has come up with really strong ideas. Democratic ideas,
Republican ideas, thoughts that have come out of studies from
the right and the left, from the center.
And it's a good methodology that I'm hoping that going
forward programs will work better. That they touch the people
that they are intended to reach out to. That whether we're in
rural settings, urban settings, that where we have a hole and a
flaw in American policy, that we can do something about that as
well.
So thank you to each of the witnesses for being available
today, for traveling, for the preparation it takes to be able
to come together and have a good conversation.
I appreciate all my colleagues who participated today.
There's a lot of interest in this particular space.
And before I wrap up, I want to enter a few more things
into the record, and I ask unanimous consent to enter a
statement from February 8, 2024 from the Wireless
Infrastructure Association in support of extending ACP; a
January 10, 2024 statement from NCTA, the Internet & Television
Association in support of extending ACP; a January 10, 2024
statement from CTIA in support of extending ACP; a January 10,
2024 statement from NTCA, the Rural Broadband Association, in
support of extending ACP; an April 15, 2024 statement from T-
Mobile in support of extending the ACP; and a statement for the
record from AARP in support of ACP and sharing research
findings about the importance of the programs for older
Americans.
[The information referred to follows:]
``On behalf of the undersigned organizations representing the United
States' information and communications industry, we urge you to support
S. Amdt. 2024 to the Securing Growth and Robust Leadership in American
Aviation Act (H.R. 3935), offered by Senators Lujan, Daines, Vance,
Welch, Rosen, and Wicker, to fully fund the Secure and Trusted
Communications Networks Reimbursement Program (Rip & Replace Program)
and extend funding for the Affordable Connectivity Program (ACP) at the
Federal Communications Commission (FCC). This amendment will provide
full and immediate funding for the Rip & Replace Program's current
$3.08 billion shortfall as well as $6 billion to extend the ACP, which
would be fully offset by future spectrum auction proceeds. Fully and
immediately funding the removal, destruction, and replacement of
untrusted network equipment via the Rip & Replace Program and
sustaining the ACP are both critical for supporting and maintaining
connectivity across the country, especially in rural areas and low-
income communities.''
Excerpt from letter undersigned by the following organizations:
Competitive Carriers Association
CTIA
INCOMPAS
NATE: The Communications Infrastructure Contractors Association
NCTA--The Internet & Television Association
NTCA--The Rural Broadband Association
Rural Wireless Association
Telecommunications Industry Association
USTelecom--The Broadband Association
Wireless Infrastructure Association
WISPA--Broadband Without Boundaries
WTA--Advocates for Rural Broadband
``In modern society, broadband is every bit as essential as food,
water, electric, and housing. Without it, families will struggle to
access school, work, healthcare, government benefits, the news, or even
a social life. There simply isn't time to wait--without immediate
action, more than 23 million households could find themselves
disconnected from the Internet in just weeks. The ACLU is grateful for
the efforts of the bipartisan group of Senators who are pushing to
ensure American households stay connected.''
Jenna Leventoff, Senior Policy Counsel, ACLU
``The Affordable Connectivity Program is essential for millions of
families across the country. We wholeheartedly support this impactful
bipartisan amendment and thank Senators Lujan, Vance, Welch, Wicker,
Daines, and Rosen for their steadfast commitment to funding this
critical program.''
Chip Pickering, CEO, Incompas
``UCC Media Justice congratulates Senators Lujan, Daines, Welch, Vance,
Rosen and Wicker on their proposed amendment to extend funding for the
critically important Affordable Connectivity Program through the end of
2024. If this amendment becomes law, the 23 million low-income families
relying on the ACP will have their trust in the program vindicated.
This critical bridge funding will pave the way for permanent ACP
funding which would mean Congress' $42 billion investment in broadband
deployment will go farther and be more likely to achieve its goals. The
bi-partisan proposal wisely relies on the auction of valuable spectrum
by the Federal Communications Commission to support affordable access
to high-speed internet--an equitable approach to digital inclusion long
supported by the civil rights community.''
Cheryl A. Leanza, Policy advisor for the United Church of Christ Media
Justice Ministry
``OTI is grateful for the efforts of the bipartisan group of Senators
who are pushing to ensure American households stay connected.
Preserving the ACP will help the millions of low-income American
households who without the program would risk being unable to pay their
Internet bills. The Internet is essential to American life, and as we
face persistent fears of inflation, the uncertainty of AI's impact on
our workforce, and continuously rising levels of disinformation and
polarization, we should not leave Americans behind.''
Lilian Coral, Head of OTI and Vice President for Technology and
Democracy programs at New America
``We at Connected Nation fully support this bipartisan amendment to
preserve the Affordable Connectivity Program (ACP). Losing this benefit
would impact the daily lives of the most vulnerable among us--the 23.3
million people who rely on Internet access for their jobs, healthcare,
education, and so much more. Internet access isn't just a luxury; it's
the lifeblood of our society. We ask Congress to preserve this benefit
for those who have come to rely upon it.''
Tom Ferree, Chairman & CEO of Connected Nation
``EducationSuperHighway thanks the bipartisan group of Senators for
their work to preserve the Affordable Connectivity Program, which has
helped more than 23 million households get online and stay connected to
the digital economy, education, healthcare, the social safety net, and
critical government services. This amendment provides critical bridge
funding to support the millions of Americans who are unable to access
vital online resources without affordable home broadband. We look
forward to working with Congress to create a permanent broadband
benefit that closes the broadband affordability gap, which accounts for
two-thirds of our Nation's digital divide.''
Adeyinka Ogunlegan, Vice President, Government Affairs and Policy,
EducationSuperHighway
``The Affordable Connectivity Program has helped 23 million households
stay connected to education, work, health care and opportunity. The
National Consumer Law Center, on behalf of its low-income clients,
urges the passage of this bi-partisan amendment to the FAA to ensure
continuation of this essential program.''
Olivia Wein, Senior Attorney, National Consumer Law Center
``Fully funding the Rip and Replace Program is critical to securing our
Nation's networks, including those serving rural areas, military bases,
airports, and other areas of strategic importance,'' said Tim Donovan,
CCA's President and CEO. ``Absent full funding, millions of Americans
face complete loss of connectivity and jeopardized access to emergency
services. Additionally, the ACP helps bridge the digital divide,
benefiting 23 million households, including seniors and veterans, many
in the same areas affected by the potential loss of service due to the
Rip and Replace shortfall. Addressing both of these issues immediately
is critical for supporting and maintaining connectivity across the
country, especially in rural areas and low-income communities.''
Tim Donovan, CCA's President and CEO
``The Affordable Connectivity Program is America's promise that
opportunity will remain available, no matter a household's financial
circumstance. This amendment is a $6 billion bipartisan commitment to
keep that promise. The Benton Institute for Broadband & Society urges
its swift passage so that 23 million households do not experience
disruptions in their essential connectivity.''
Drew Garner, Director of Policy Engagement, Benton Institute for
Broadband & Society
``Common Sense Media appreciates the steadfast support of this
bipartisan group of Senators to ensure the continuation of the
Affordable Connectivity Program. More than 23 million households rely
on ACP to learn, work, and access healthcare. This amendment will
ensure that our students will have consistent access to the Internet at
home as they finish their end of term projects and study for finals.''
Amina Fazlullah, Head of Tech Policy Advocacy, Common Sense Media
``The National Digital Inclusion Alliance and our community of 1700+
affiliates thanks the bipartisan group of Senators for their work to
extend the Affordable Connectivity Program. This act and the ongoing
work to find a permanent solution for funding a broadband benefit gets
our country a step closer to students doing their homework at home
rather than in parking lots, to veterans receiving health support
online, and job seekers matching with employers.''
Angela Siefer, Executive Director of the National Digital Inclusion
Alliance
``The National Lifeline Association (NaLA) thanks Senators Lujan,
Welch, Vance, Wicker, Rosen, and Daines for their amendment to the FAA
bill that would fund and reform the Affordable Connectivity Program
(ACP). Internet access in our digital era is absolutely essential,
particularly for seniors, rural communities, and veterans who
participate in and depend on the ACP every day to connect to
telehealth, education, jobs, and community. This is a critically
important amendment and we urge Congress to include this amendment in
the must-pass FAA reauthorization.''
David B. Dorwart, Chair, National Lifeline Association (NaLA)
``We applaud the bipartisan amendment in the Senate to extend the ACP.
We call on the Senate to move quickly to add this amendment to the FAA
Reauthorization legislation to ensure that 23 million families don't
lose Internet access. This amendment demonstrates that Congress can put
politics aside. The Senate should move quickly so this extremely
popular program can continue. By doing so, Congress would give
themselves and the FCC time to start the process of reforming the
Universal Service Fund so it can provide a permanent funding mechanism
for low-income families to get and stay connected.''
Gigi Sohn, Spokesperson for the Affordable Broadband Campaign
``Millions of low-income Americans are at risk of losing Internet
access as the Affordable Connectivity Program runs out of funding. As
we argued at our rally just last week, broadband is an essential
communications network for all. The ACP is critical for providing
access to broadband and the education, healthcare, and economic
opportunities that it provides. Our ultimate goal then and now remains
to save the program so we do not disrupt service for any enrollees--the
families who need the ACP most. We support this compromise, bipartisan
amendment for its ability to bridge the funding gap while Congress
continues working on a long-term solution. Congress must pass this
amendment immediately. After that vote, the work is not done until we
have a sustainable long-term fund for broadband affordability and other
solutions to the digital divide.''
Chris Lewis, President and CEO of Public Knowledge
``I am very pleased to see this bipartisan amendment submitted to the
FAA Reauthorization Act. The amendment would provide much needed
funding to ensure that American families and veterans stay connected,
our networks remain safe and secure from foreign adversaries, and we
continue to use every usable spectrum band to fuel our wireless
networks. These measures are all necessary to promote the U.S.'s
competitiveness and close the digital divide for good.''
Joel Thayer, President of the Digital Progress Institute
``Extending the Affordable Connectivity Program is critical to
connecting every American to high-speed, affordable internet. It is
currently the best tool we have to bridge the digital divide. Pew
applauds Congress' collaboration and encourages lawmakers to support
this bipartisan amendment. With millions of people lacking access to a
service that has become essential for quality of life and economic
well-being, the time to act is now.''
Kathryn de Wit | project director, The Pew Charitable Trusts' broadband
access initiative
``CWA members strongly support the continuation of the Affordable
Connectivity Program which enables critical Internet access for
millions of American families and supports good jobs in our
communities. We are encouraged that a bipartisan group of Senators is
working to prevent the ACP from completely shutting down and on a
permanent funding solution.''
Shane Larson, Communications Workers of America Senior Director for
Government Affairs and Policy
``The SHLB Coalition strongly supports the Lujan/Vance amendment to
preserve funding for the Affordable Connectivity Program (ACP). The
Senate should move quickly so this extremely popular program can
continue. Broadband access is essential for education, healthcare, and
economic opportunity. The ACP plays a crucial role in bridging the
digital divide and ensuring that all Americans have a fair shot at
success.''
John Windhausen, Executive Director at SHLB
``The R Street Institute is proud to support this important proposal to
extend both Rip and Replace and the Affordable Connectivity Program
(ACP) with an appropriate pay-for. This proposal makes meaningful
reforms to target customers most in need and streamline eligibility
requirements, which R Street has long supported achieving in a revenue-
neutral way. While this will only temporarily extend the ACP, R Street
hopes the efforts of the Universal Service Fund (USF) working group
continues to find a solution and permanent home for this program within
USF.''
Jonathan Cannon, Policy Counsel Technology & Innovation at the R Street
Institute
``The Center for Civil Rights and Technology commends the amendment
from Senators Lujan, Daines, Welch, Vance, Rosen, and Wicker that
provides $6 billion in funding for the FCC's Affordable Connectivity
Program (ACP). Lack of high-speed Internet access among low-income
people, communities of color, and other marginalized communities is
concerning, especially at a time when millions need the Internet to
further their education, earn a living, and access essential goods and
services. The strength and continuation of the ACP is essential to our
mission to ensure digital equity. With the number of days ticking down
for ACP solvency, the Center believes this is the only viable path
forward to ensuring more than 23 million families are not disconnected.
The Center also urges lawmakers to secure permanent funding for this
critical program.''
Koustubh ``K.J.'' Bagchi, Vice President of the Center for Civil Rights
and Technology
``WIA is proud to join the collective support for S. Amdt. 2024 to the
Securing Growth and Robust Leadership in American Aviation Act (H.R.
3935). This critical bipartisan amendment, offered by Senators Lujan,
Daines, Vance, Welch, Rosen, and Wicker, seeks to address the urgent
need for full funding of the Secure and Trusted Communications Networks
Reimbursement Program, known as the Rip & Replace Program, which
currently faces a significant shortfall of $3.08 billion. In addition,
the amendment extends funding for the Affordable Connectivity Program
(ACP) by allocating $6 billion, ensuring that crucial connectivity
services remain accessible to underserved communities across the United
States.
These measures are essential to safeguarding our Nation's
communications infrastructure while promoting digital equity and
inclusion. The Rip & Replace Program will enhance the security and
resilience of our telecommunications networks, while the extension of
ACP funding will enable millions of Americans to stay connected. WIA
stands with our industry partners in urging support for this important
amendment to bolster our communications networks and enhance
connectivity for everyone.''
Wireless Industry Association
Senator Lujan. I think we can get there. We can find a way
to work together. We can address concerns to ensure that we're
going to have real broadband connectivity across the country
that's fast and that's affordable.
Now we know the stakes are simply too high, especially with
our veterans and students, families, rural, and older
Americans. So over the next week, I'm committed to continue
working with my colleagues to extend this program, and once we
do that, I look forward to bringing forth this long-term
solution to permanently fund these programs with reforms with
the work of the Universal Service Fund Working Group.
Now with that, I will close the hearing. Should members
have additional questions for the witnesses for the record, I
ask that they submit them to the Committee within two weeks,
and witnesses will have an additional two weeks to respond.
So everyone, thank you so very much for your time. I thank
the staff for helping us get this done. This hearing is closed.
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
Response to Written Question Submitted by Hon. Tammy Duckworth to
Kathryn de Wit
Affordable Connective Program Impact on Military Families and Veterans
In 2018, the Federal Communications Commission released a report on
the state of broadband access and adoption by veterans in which it
determined a key barrier to broadband adoption for veterans was due to
the monthly cost of an Internet subscription. More recently, in an
April CNET article, Department of Veterans Affairs Press Secretary
Terrence Hayes commented about the Affordable Connectivity Program,
``If the program ends, then some veterans will have to pay $30 to $75
more for access to the Internet every month--and others may lose access
to the internet entirely. That's unacceptable, especially at a time
when telehealth has become such an important tool.''
Question. How has the digital divide uniquely impacted military
families and veterans? What impact has the Affordable Connectivity
Program had on our servicemember and our veterans? Why do you think
nearly half of the households benefitting from the Affordable
Connectivity Program are military families?
Reliable and affordable Internet connections are essential to U.S.
military veterans accessing the benefits they have earned--from
education and home loans to healthcare. However, 15 percent of all
veterans in the U.S. and 27 percent of rural veterans do not have an
Internet connection. ACP helps bridge that divide and connects veterans
and active military with the critical resources they need.
Veterans can qualify for ACP through a number of channels--more
than 1.1 million households are enrolled because they receive VA
Veterans Pensions or Survivors Benefits, and 1.2 million veteran
households qualify through SNAP.
It is abundantly clear that these families rely on the broadband
benefits afforded by the program.\1\ Access to health care through
telehealth services is an essential resource for veterans. In 2018,
just 13 percent of veterans who received health care from the VA did so
through VA telehealth programs. From January 2020 to January 2021, the
number of telehealth appointments offered by the VA increased by 1,831
percent. In 2022, approximately one million veterans used telehealth
services for mental health care. Veterans are not only older on average
than other Americans (61 years old to 45 years old), but they are also
twice as likely to be disabled, underscoring why access to digitally-
enabled medical care--from telehealth to wearables--is necessary.
---------------------------------------------------------------------------
\1\ Pew has not explored in great detail why the percentage of
households with veterans enrolled in ACP is high, or even higher than
other covered populations. But it is an important question worth
researching and would require additional time, resources, and
collaboration with the Department of Veterans Affairs.
---------------------------------------------------------------------------
Veterans and active-duty members of the military are also using the
Internet to break down barriers to education and employment
opportunities, as the group is more likely to seek degrees online than
their non-military peers. Twenty-four percent of veterans receiving
education benefits are enrolled in an online program, compared to just
14 percent of all undergraduates. Remote work has also helped bridge
the digital divide, as it has been shown to ease the transition for
veterans suffering from post-traumatic stress disorder as they enter
the workforce.
Allowing ACP to lapse could roll back the progress made for
veterans and others and put additional financial pressure on millions
of veterans' households, including the 4.4 million who live in rural
areas, of which 44 percent make $35,000 or less annually. This could
result in households having to choose Internet plans with lower speeds
and capabilities or cancel their subscription. Millions of Veterans
rely on this benefit to afford quality Internet plans that allow them
to access healthcare resources, education, and employment
opportunities, and they could struggle to maintain access if ACP ends.
______
Response to Written Questions Submitted by Hon. Ted Cruz to
Kathryn de Wit
Technology Neutrality
You testified during the hearing about the difficulties and high
costs associated with serving rural locations. One of the ways to
reduce deployment is allowing subsidies, like the Broadband Equity
Access and Deployment (BEAD) Program, to be technology neutral and not
favor one broadband technology (e.g., fiber) over others (e.g., fixed
wireless or satellite) that can deliver similar speeds at a much lower
cost.
Question 1. Do you have concerns regarding the administration of
the BEAD program with respect to technology bias?
Answer. Cornell University's research (2023) found that most states
employed technology neutral policy in statute and state-funded grant
programs. This included expanding applicant eligibility to incorporate
non-traditional Internet service providers (i.e., cooperatives)
offering a multitude of technologies--including wireless. States scored
applications using a range of tactics, including scalability and long-
term capability. Of the 724 state grant program awards across 17
states, Cornell found that more than half (57 percent) went to fiber
projects.
The BEAD program is designed to ensure unserved and underserved
communities receive high-speed, reliable Internet access. While BEAD's
authorizing statute and funding rules favor fiber and upgraded cable
technology, past research from The Pew Charitable Trusts and Cornell's
2023 report indicate that states will pursue a range of technologies to
meet congressional goals. Fiber deployments provide the most
reliability, higher speeds, and can be more easily scaled to meet
future speed and capacity demands and keep pace with the evolving needs
of the internet. Applications from providers proposing to use
alternative technologies that offer less reliable or lower speeds will
be considered by state broadband offices if the cost for a fiber
deployment is unreasonably high, as determined by each state's high-
cost threshold and the National Telecommunications and Information
Administration (NTIA).
Question 2. Do you agree that a technology neutral approach for
Federal broadband programs would reduce costs and increase deployment?
Answer. While deploying networks cost efficiently and without delay
is important, so are considerations for the long-term return on
investment. Different technologies may meet minimum requirements, such
as speeds above 25/3 Mbps, and can be faster and cheaper to deploy, but
may introduce other limitations that impact the quality or reliability
of service for the user. Although fiber can be expensive to deploy, it
is more future-proof than other technologies because of how easy it is
to upgrade and scale to meet technologically driven demands of
today's--and tomorrow's--economy. However, it is important to note that
Pew is not in favor of fiber connecting every household. Rather, our
research concluded that ``setting a forward-looking goal focuses state
investment on infrastructure that will continue to meet future needs.''
Our research shows that BEAD's approach to first consider fiber
projects before evaluating alternative technologies strikes the right
balance of delivering high-speed, reliable service while protecting
taxpayer-funded investments. BEAD helps guarantee that an unserved
community that is funded by BEAD will be served for generations to
come.
Affordable Connectivity Program
Question 3. Your written testimony states ``ACP recipients pay a
median of $40 a month after the benefit is applied.'' Please provide
the citation for this data point.
Answer. A January 2023 survey from the Benton Institute found that,
``When asked what they pay for Internet service after the ACP subsidy,
the median figure cited by households that had signed up for fixed
service was $40 per month.''
Question 4. Your written testimony cites statistics on who benefits
from ACP from a recent Benenson Strategy Group survey in partnership
with--i.e., paid for by--a telecommunications provider receiving ACP
(Comcast). According to the methodology of that survey, the sample size
was 1,600 people who ``are eligible for ACP,'' with an ``over
sampling'' of people enrolled in ACP, reported as ``801.'' Does this
methodology and sample fit the standards for surveys at Pew Charitable
Trusts?
Answer. We appreciate your question regarding the veracity of the
methodology used in this report. As documented in the testimony
submitted to the Committee, there are shortcomings with the data
available on ACP enrollment. Further, more research is needed to
adequately understand the long-term effects of this program, including
on competition in the marketplace.
Generally, Pew does not comment on the methodology of other studies
unless we have full access to the underlying approach, design, and
goals of the research. However, upon review, the Benenson Strategy
Group methodology follows best practices for survey research, as
reported by the American Association of Public Opinion Research
(AAPOR). Additionally, BSG follows many of the transparency guidelines
outlined by AAPOR, including a listing of the data collection strategy,
the sponsor of the research, and the population under study.
Finally, it is Pew's view that oversampling for the population of
ACP participants was appropriate given the nature of the population in
question for the survey. Oversampling can be a useful tool for
analyzing smaller groups of a given population. In this case, the
smaller group was ACP recipients. Furthermore, the methodology section
makes clear that ``ACP Participants'' in the report ``reflect American
adults who are aware that their household participates in the
Affordable Connectivity Program.'' Oversampling, in this case, provides
for more reliable estimates of the impact of ACP on those benefiting
from the program.
Question 5. Your written testimony cites another telecommunications
provider survey (Cox). This survey states it had 551 respondents in six
states of approximately 6,000 customers. There is no indication in the
methodology section as to whether this population received ACP.
a. What does this survey tell us about the impact of ACP on rural
broadband as opposed to simply reporting general benefits of having
broadband?
Answer. This survey was not designed to show the impact of ACP on
rural broadband.
b. What evidence has Cox provided that there has been an increase
in rural access as a result of ACP?
Answer. This report does not evaluate the impact of ACP on rural
access.
At this time and with the available data, it is unclear what
percentage of this funding has gone specifically to rural areas. More
data is needed to assess this question and to ascertain the impact of
ACP on rural customers.
Question 6. Before ACP, broadband companies would compete for
customers by offering lower prices and/or better service. With ACP's
$30 subsidy, there is no competitive benefit to offering a service for
less than $30 a month. Consequently, ACP discourages competition on
price.
c. Please provide the Committee with evidence of broadband
offerings at less than $30 per month since the program began and before
it was announced that it was ending.
Answer. The National Digital Inclusion Alliance maintains a list of
free and low-cost Internet plans for consumers, several of which were
available before ACP existed, including Comcast's Internet Essentials
for less than $10 per month.
d. Please provide the Committee with evidence of changes in the
frequency of customers switching broadband providers before and after
ACP.
Answer. We are not aware that any such dataset exists.
Question 7. You stated in your testimony that ACP is essential to
the success of the BEAD program. Does Pew view ACP as a substitute for
the high-cost program at FCC, which provides subsidies to telecom
providers in exchange for providing service to rural consumers at rates
that are reasonably comparable to those charged in urban areas?
Answer. The ACP and Universal Service Fund (USF) high-cost programs
are not substitutes but should work in harmony, playing vital and
complementary roles in achieving broadband access. Specifically, USF
will play a role in addressing supply-side barriers to network
deployment and operations, while affordability subsidies, such as ACP,
address demand-side cost considerations for customers and Internet
service providers.
More specifically, the ACP ensures that broadband is affordable to
consumers in low return-on-investment areas, thereby translating
deployment into actual adoption. The high-cost program, on the other
hand, provides financial support to ISPs, empowering them to expand
broadband networks in rural areas facing geographic and economic
challenges. Both programs are essential in fulfilling the
congressionally mandated goal of universal broadband service.
Question 8. How much BEAD funding is anticipated to go to the urban
consumers that make up the vast majority of current ACP recipients?
Answer. At this time, we cannot quantify precisely how much BEAD
funding will go directly to rural or urban areas as states must first
complete the adjudication of their challenge processes to determine a
final list of BEAD-eligible locations.
State officials will determine where this funding is directed, and
we do have recent evidence from the U.S. Treasury Department's Capital
Projects Fund (CPF) suggesting states will tailor solutions to fit
their specific needs. For example, multiple states prioritized rural
broadband expansion through CPF-funded projects or created multiple
grant programs focused on both urban and rural areas. We anticipate
that states will develop policies and programs similar to BEAD funding,
but it is too early to definitively assess what those will be.
______
Response to Written Questions Submitted by Hon. Ted Cruz to
Blair Levin
Affordable Connectivity Program
Question 1. In your opening statement, you write: ``But we do know
53 percent rural survey respondents and 47 percent of all respondents
reported having either zero Internet connectivity or relying solely on
mobile Internet service prior to receiving their ACP benefit.''
a. What is your reason for counting households with only mobile
service in the same bucket as households with no service at all? Do you
consider these types of households to be similarly situated?
Answer. The key points to my answer are briefly summarized
immediately below, with a more complete answer provided thereafter.
As the FCC and Congress have correctly found, mobile
services and in-home broadband are not perfect substitutes,
with each serving functions that should be universally
accessible.
Part of the difference relates to the functionalities
inherent in different screen and key board sizes, while other
differences relate to market-based realities such as data caps.
A key strength of the current ACP program is its flexibility
in giving customers choice over the selected service they opt
into.
The program in the future should maintain that strength so
that the recipients can choose the best service or services for
their needs as technologies and markets evolve.
Thank you for the opportunity to clarify my thinking behind that
statement. It is a good question, though the answer is complicated,
requiring both a look back at history but also an understanding of
potential changes in the market in the future.
My basic answer is that today, there is an important distinction
between mobile services on a smart phone and broadband services
provided in the home to a computing device with a larger screen. In
that sense, the homes in the question are not similarly situated.
The history here is important. In 1985, during the Reagan
Administration, the FCC created the Lifeline program, designed to
assure that all Americans had access to a minimum level of voice
services to communicate with emergency services, jobs, and family.
During the George W. Bush Administration, the FCC allowed the Lifeline
subsidy to be used for mobile services.
Both decisions by Republican FCCs stand up well in the light of
history. The Reagan era Lifeline program served its purposes well. But
so did the adjustment to market changes done under the George W. Bush
FCC. Today, more than 90 percent of the Lifeline funds go to mobile
services.\1\ This makes sense, particularly as to emergency services,
where emergencies often happen outside the home, and voice services,
which are now largely done on mobile devices.
---------------------------------------------------------------------------
\1\ https://www.benton.org/sites/default/ files/
reimagininglifeline_final1_0.pdf
---------------------------------------------------------------------------
But just as the George W. Bush FCC recognized, the world does not
stay static. After the 2010 National Broadband plan, the FCC, under
both Democrats and Republicans, recognized that universal service funds
should no longer be allocated to voice only networks but should be
restructured to reflect that communications are now dependent on
broadband networks, and that we should analyze and acknowledge how
different networks serve different purposes. Under both the Obama and
Trump administration, changes were made to the universal service
program generally and further changes were made to the Lifeline
program.\2\
---------------------------------------------------------------------------
\2\ The specific changes to Lifeline are not relevant here except
to reflect that problems in the program do not justify ending them but
rather should cause analysis and course corrections, as the FCC has
done.
---------------------------------------------------------------------------
Further, in 2021 Congress, on a bipartisan basis, came to a similar
and important conclusion, finding that ``Access to affordable,
reliable, high-speed broadband is essential to full participation in
modern life in the United States;'' and that ``(t)he persistent
`digital divide' in the United States is a barrier to the economic
competitiveness of the United States and equitable distribution of
essential public services, including health care and education.''
Congress was right to do so. And we should recognize that there are
many uses of broadband services that we want people to be able to do
that require a larger screen, different functionalities, and different
kinds of keyboards than mobile phones offer. These include performing
jobs that require document production, job training, job placement
activities, doing homework and associated research, many (though not
all) telehealth services, and interactions with government social
services, among others.
The difference between mobile and fixed is not just a function of
screen sizes. There is also a market difference in that low-end mobile
services often include a data cap that makes certain uses, such as
homework, job training, and telehealth, problematic from the point of
view of the user. My point is not that such data caps should be
regulated; after all, such data caps reflect the reality that spectrum
through the air is a scarcer resource than spectrum in a wire. My point
is that that policy makers should understand that while mobile services
for low-income users carries with it restrictions on how much they can
use the service, fixed services for low-income households generally do
not have those restrictions.
An example of how these factors demonstrate the difference between
the common mobile plan and in-home broadband can be seen in a study by
the Quello Center which noted that ``contrary to some expectations that
students can get by through the use of a cell phone as a substitute for
high-speed home Internet access, those who rely on a cell phone only
for Internet access outside of school experience as large, or larger,
gaps in performance than those with no home Internet. Unlike their
peers, students who are dependent on a cell phone for Internet access
outside of school rely on smaller screens with slower devices, have
access to content with fewer features, and need to monitor data caps
and recharge pre-paid phone plans.'' \3\
---------------------------------------------------------------------------
\3\ https://quello.msu.edu/wp-content/uploads/2020/03/
Broadband_Gap_Quello_Report_MSU
.pdf#page=5
---------------------------------------------------------------------------
Considering that history and the practical consumer realities, I
see mobile and fixed broadband as related but not perfect substitutes.
That is, while there are functions that can be done on both, there are
other functions, critical to public policy goals, that as a practical
matter can only be done on one or the other.
That is why, at least for now, I would count households with only
mobile service in the same bucket as households with no service at all.
Having said that, we should be conscious that technologies and
functionalities evolve. It could be that mobile networks provide the
necessary bandwidth--some would argue they already do--to accomplish
the public policy goals, provided the recipient has the computing
devices necessary for activities related to public purposed, such as
education, job training and placement, and health care.
In this regard, I think one strength of the current ACP program is
its flexibility in giving customers choice over the selected service
they opt into. Going forward, I would hope that the FCC and Congress
evaluate current practices and continue to structure the program to
optimize for flexibility and consumer choice for program recipients.
b. Given that, per the FCC's data, the majority of ACP recipients
(55.9 percent) choose to apply ACP to their mobile phone subscriptions,
do you believe that ACP has not been successful for this cohort of
recipients?
Answer. The key points to my answer are briefly summarized
immediately below, with a more complete answer provided thereafter.
The ACP has largely been a successful program.
Every new program has flaws that require study and
adjustment.
The data cited, which is likely out of date, ignores how the
predecessor program, the EBB, was a mobile program and how the
percentage using the funds for mobile has gone down and is
likely to go further down.
The key, as noted in the answer to 1a, is for the government
to structure the program so that recipients have practical
access to all the essential services that are now offered
online.
As a preliminary matter, let me repeat what I said in my testimony.
I am in complete agreement with the 20 House Republicans who wrote to
Speaker Johnson last month asking for action on ACP, who wrote that
``We believe that bipartisan solutions are within reach to ensure
uninterrupted access to the ACP while concurrently pursuing long-term
funding strategies.'' That is, I hope Congress would provide an ACP
extension and then, as part of a larger and necessary Universal Service
Fund reform effort, design a more efficient and sustainable program
that moves us toward universal adoption.
So here, while I believe Congress should provide funding to extend
the current ACP program, I also would support reforms to all universal
service programs that achieve the goals but in more through a more
efficient and sustainable framework.
Specifically, to your question, I would hope that the FCC and
others would provide the information necessary for Congress to evaluate
why those ACP recipients chose to apply ACP to mobile, as opposed to
in-home, subscriptions. Such an analysis should look at other barriers
to adoption, such as the availability of the service and/or devices,
different pricing strategies, and the role of digital literacy, among
other potential reasons that might be relevant to how the program is
structured in the future.
Having said that, I want to be clear that I would not challenge the
good faith of the recipients, who are in a far better position than I
to evaluate what is in their best interest. But such an analysis would
be helpful in considering how to structure the program going forward.
Further, I would guess that a significant percentage of the
wireless usage was driven by the history of the program in which the
Emergency Broadband Benefit (EBB) that preceded the ACP was primarily a
mobile program. Based on conversations I have had in the context of my
Wall Street work as well as data I have seen,\4\ I believe that the
percentage of the use of ACP for mobile has, in fact, declined from its
early days. The data therefore suggests that the FCC data you cite may
be out of date and more up to date studies would show that a higher
percentage of ACP recipients chose to use the subsidy for a wireline
service.
---------------------------------------------------------------------------
\4\ On 12/31/2021 (end of EBB) enrollment was 67 percent mobile, 33
percent fixed. https://www.usac.org/about/emergency-broadband-benefit-
program/emergency-broadband-benefit-program-enrollments-and-claims-
tracker/additional-ebb-program-data/ By 02/08/2024 (end of ACP),
enrollment was 56 percent mobile, 43 percent fixed. https://
www.usac.org/about/affordable-connectivity-program/acp-enrollment-and-
claims-tracker/additional-acp-data/ Also, the data show a huge spike in
Lifeline-pathway enrollment right at the beginning of EBB, which makes
sense given Lifeline providers were well positioned to move fast.
Presumably most of those were mobile users.
---------------------------------------------------------------------------
But as noted in my answer to your question 1a, I am of the view
that for purposes of adequately responding to the Congressional finding
noted above regarding how ``access to affordable, reliable, high-speed
broadband is essential to full participation in modern life in the
United States'' and to the ``equitable distribution of essential public
services, including health care and education,'' we should seek to
structure a permanent program that achieves universal access to both
mobility and to in-home broadband services.
There are multiple ways to do so. One could have two separate
funds, one solely for mobility and one solely for in-home broadband.
However, given the current trends toward convergence--a key trend that
communications investors see as one of the most important indicators of
where they should be investing--in which some traditional fixed
providers (cable) are offering mobile services and traditional mobile
providers (such as AT&T, Verizon, T-Mobile) are offering fixed services
as well, I would urge policy makers to structure the ultimate long-term
program to enable the private sector to develop different options that
accomplish the same goal: universal mobility and in-home broadband.
Again, the key here is the flexibility to enable the program recipients
to respond to both their own needs and changes in the market, as well
as driving ISPs to compete for their business.
Finally, the question implies that the results to date challenge
the success of the ACP program. I have been involved in public policy
debates, as a participant or an observer for over 30 years. It always
amazes me the way inside some inside the beltway have the view that any
problem in a program, particularly a new program, justifies a failing
grade. That is not the way the world works. Every organization--
private, public, or non-profit--will try things, study the results, and
then adjust the program to improve its effectiveness.
The FCC's spectrum auction program is the most successful
telecommunications policy innovation of all time, both in the United
States and abroad, where countries around the world followed the model
established in the United States in the mid-1990s. Spectrum auctions
succeeded, where other methods like comparative hearings and lotteries
failed, in efficiently allocating and reallocating spectrum to higher
and better uses.
But having been present at the creation, I am acutely aware of
mistakes we made early on in some of the early auctions, mistakes for
which I bear some responsibility. But the important thing was that--and
here the FCC staff and leadership deserve the credit--the institution
learned from those mistakes and quickly pivoted to changes that made
the program one that has been replicated around the world.\5\
---------------------------------------------------------------------------
\5\ From a perspective of 2024, spectrum auctions may seem obvious
and simple. From the perspective of 1993, when Congress authorized the
FCC to allocate spectrum through auctions, it was not. But the FCC
consulted the best minds for creating the auctions and decided to use
an innovative simultaneous multi-round ascending auction design. That
design worked, as indicated by, among other things, the success of
nearly all the auctions, the use of theory that won the 1994 Nobel
Prize for economics, and the FCC auctions being cited in awarding the
2020 Nobel prize for economics. But there were hiccups and problems
along the way.
---------------------------------------------------------------------------
I would further argue that the ACP program has been, in the grand
scheme of things, very effective. While there are legitimate
criticisms, there have also been significant accomplishments. For
example, a Georgetown McDonough School of Business examination of the
program in October, 2023 found that based on the data so far, ``(1) the
ACP has successfully transitioned from the stop-gap EBB program to a
low-income assistance program that is more stable, and which in less
than two years has enrolled over 20.6 million households; (2) the
program has acted to provide standardized vehicles for efficient
enrollment;\6\ (3) the ACP includes multiple paths to establish
eligibility, which eases impediments to eligible household
participation; (4) while large population states have naturally seen
the largest subscriptions to the ACP, the greatest percentage changes
in subscriptions have been in more rural, low-population states;\7\ and
(5) the program appears to have stimulated enrollment within certain
high populated Native American counties.'' \8\
---------------------------------------------------------------------------
\6\ In a way that is unusual for government programs, particularly
in the early days, more than 80 percent of enrollees were satisfied
with the enrollment process. https://connectednation.org/static_assets/
5a34b1a7-fb9e-4a72-98be-1524f8db1df9/
23_ATT_Mind_The_Gap_9.5_hi.pdf#page
=7
\7\ This is also consistent with the Dr. Horrigan's research which
has also found that, as a percentage of total households, ACP
enrollment in rural areas outpaced urban areas https://www.benton.org/
blog/affordable-connectivity-program-and-rural-america
\8\ DeStefano, Tim and John W. Mayo ``What do the Early Data
Indicate about the Affordable Connectivity Program,'' Georgetown
University, McDonough School of Business, Center for Business and
Public Policy, October 2023. Available here https://
georgetown.app.box.com/s/dgid
kcv02uo0b70asay69l65syyem39h
---------------------------------------------------------------------------
In short, your question raises a good point. But the answer lies in
understanding our goals and then adjusting as necessary to achieve
those goals. The key, as noted in the answer to 1a, is for the
government to structure the program so that recipients have access to
all the essential services that are now offered online. I believe the
FCC and Congress are up to that challenge, but the path forward to
success lies in study, constructive debate, and then better solutions,
not simply criticisms, followed by inaction.
Question 2. In response to a question from Sen. Lujan during the
hearing, you emphasized that you were not a health care economist. Yet,
you claimed the economic benefit of ACP to the health care system would
be greater than cost of administering ``sometime in the near future.''
a. What evidence do you have to support this claim?
Answer. The key points to my answer are briefly summarized
immediately below, with a more complete answer provided thereafter.
My written testimony cites many studies indicating
significant cost savings and additional studies are included
here.
Broadband is a general-purpose technology that produces
productivity gains throughout different sectors of the economy.
The cost of providing it to those who cannot currently afford
it is relatively small compared to the economic gains that such
access would provide, in healthcare and other areas.
Two House committees recently unanimously passed extensions
to telehealth reforms initially adopted to enable telehealth
during Covid, implicitly confirming the value of telehealth to
improve outcomes and lower costs.
While I am confident that I am directionally correct, there
are many ways to run the numbers. It would be helpful in the
context of not just the ACP debate, but also for the future of
Medicare, Medicaid, and the Veterans Administration for the
Administration and/or Congress to seek an authoritative study
on how best to utilize telehealth to improve the outcomes and
lower the costs of those programs.
In doing that study, it is important to ``skate where the
puck is going,'' which includes improvements to and increases
in the utilization of telehealth.
My written testimony points to numerous studies that point to
savings through telehealth. Specifically, I wrote that ``It should not
be surprising that as a 2021 medical paper found that ``Digital
literacies and Internet connectivity have been called the `super social
determinants of health' because they address all other social
determinants of health (SDOH). For example, applications for
employment, housing, and other assistance programs, each of which
influences an individual's health, are increasingly, and sometimes
exclusively, accessible online. The costs of equipping a person to use
the Internet are substantially lower than treating health conditions
and the benefits are persistent and significant, making the efforts to
improve digital literacy skills and access valuable tools to reduce
disparities.'' \9\
---------------------------------------------------------------------------
\9\ https://www.nature.com/articles/s41746-021-00413-8
---------------------------------------------------------------------------
Similarly, a 2018 a Georgetown Business School paper looking at
multiple studies found that as to telehealth (referred to in this paper
as eHealth) the'' deployment of the Internet creates the possibility
that consumers can access information at significantly lower costs than
heretofore possible. But does this access to online health-related
information (i.e., eHealth) improve healthcare behaviors and outcomes?
We find that eHealth use promotes precautionary and acute healthcare
consumption and improves health outcomes.\10\
---------------------------------------------------------------------------
\10\ Macher, Jeffrey T., John W. Mayo and Olga Ukhaneva ``Does the
Internet Improve Consumer Healthcare Behaviors, Georgetown University
working paper, October 29, 2018.
---------------------------------------------------------------------------
But it is not just good for the patient; it is also good for the
patient's insurance company. As the largest health care insurer, the
Federal government should want to take advantage of savings such as
those seen in a recent study \11\ finding the cost savings of using
telehealth for patients with cancer ranged from $147 to $186 per visit,
or the University of Pennsylvania study \12\ showing that telemedicine
was 23 percent less expensive than in-person visits. Cigna found that
``average cost of a non-urgent virtual care visit is $93 less than the
average cost of an in-person visit. Seeing a specialist averages $120
less for a virtual visit than an in-person visit, while a virtual
urgent-care visit averages $141 less than being seen in an urgent care
clinic.'' \13\ Similarly, a 2023 study \14\ by the Department of
Veterans Affairs found that ``veterans who utilized a new tele-
emergency service were nearly half as likely to visit an emergency
department in-person and showed reduced short-term Veteran visits to
emergency departments outside of VA.''
---------------------------------------------------------------------------
\11\ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/
2800164
\12\ https://www.pennmedicine.org/news/news-releases/2023/june/
employee-telemed-visits-25-percent-less-costly-for-health-system
\13\ https://newsroom.cigna.com/convenient-cost-effective-and-high-
quality-virtual-care-is-here-to-stay
\14\ https://www.va.gov/ann-arbor-health-care/stories/new-research-
telehealth-emergency-care-
leads-to-decreased-emergency-department-visits-hospitalizations-
reduced-health/#: :text=Health%
20Care%20Costs-
New%20Research:%20Telehealth%20Emergency%20Care%20Leads%20to%20
Decreased%20Emergency%20Department,Hospitalizations%2C%20Reduced%20Healt
h%20Care
%20Costs
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Another area where telehealth can improve both costs and outcomes
is with maternal mortality rates. The United States has an alarming
trend line in this arena, with an increase of 60 percent in maternal
mortality between 2019 and 2021.\15\ At the behest of Congress, the
Federal Communications Commission mapped where maternal mortality is
highest--and the maps of places where new mothers die at the highest
rates look a lot like maps of where household Internet subscription
rates are low,\16\ both being consequences of low household income.
---------------------------------------------------------------------------
\15\ https://healthcare.rti.org/insights/digital-health-maternal-
outcomes
\16\ https://www.fcc.gov/reports-research/maps/connect2health/
maternal-health-map.html?bb
Sel=Broadband+Access&mhSel=Maternal+Deaths&bbThresh=90.25&mhThresh=1&md=
2
---------------------------------------------------------------------------
It is worth noting that there are promising ways to address
maternal mortality that rely on home broadband for new mothers. In
Louisiana, Ochsner Health has had success in using digital tools to
monitor at-home blood pressure and other risk factors for pregnant
women, resulting in fewer hospital admissions and cesarean section
procedures. Such remote maternity online monitoring has reduced
unexpected neonatal intensive-care unit admissions by 27 percent.\17\
---------------------------------------------------------------------------
\17\ https://www.ama-assn.org/practice-management/digital/how-
digitally-enabled-care-can-improve-postpartum-outcomes
---------------------------------------------------------------------------
The healthcare benefits of using digital tools extend beyond
maternal mortality. Telehealth is associated with people maintaining
their participation in opioid treatment programs \18\ and telehealth
can reduce the cost of healthcare service delivery with only marginal
increases in in-person visits.\19\
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\18\ https://jamanetwork.com/journals/jamanetworkopen/fullarticle/
2810828
\19\ https://www.ajmc.com/view/economics-of-a-health-system-s-
direct-to-consumer-telemedicine-for-its-employees
---------------------------------------------------------------------------
These citations are not exhaustive. For example, as a recent
article noted ``a significant portion of telehealth visits in 2021--44
percent to be precise--were related to chronic conditions, which are
more prevalent in lower-income areas. Research has shown that the use
of telehealth services can potentially reduce mortality rates and
hospital stays among lower-income patients.'' \20\ In this regard, let
me also point to a study cited in the 2010 National Broadband Plan that
found that remote monitoring could generate net savings of $197 billion
over 25 years from just four chronic conditions.\21\ Further, as the
2010 National Broadband Plan also found ``video consultations could
lead to $1.2 billion in annual savings through avoiding costs from
moving patients from correctional facilities and nursing homes to
emergency departments and physician offices.'' \22\ The Plan pointed to
even greater savings through the use of telehealth for the Veterans
Health Administration (VHA) where a Care Coordination/Home Telehealth
(CCHT) program ``led to a 25 percent reduction in bed days of care and
a 19 percent drop in hospital admissions. At $1,600 per patient per
year (the cost of the CCHT program), it costs far less than the VHA's
home-based primary care services ($13,121 per year) and nursing home
care rates ($77,745 on average per patient per year.)'' \23\
---------------------------------------------------------------------------
\20\ https://www.statnews.com/2023/07/20/acp-internet-access-
health-care/
\21\ Robert Litan, Better Health Care Together Coalition, Vital
Signs Via Broadband: Remote Health Monitoring Transmits Savings,
Enhances Lives (2008), available at http://www
.betterhealthcaretogether.org/Library/Documents/
VITAL%20SIGNS%20via%20BROADBAND%
20FINAL%20with%20FOREWORD%20and%20TITLE%20pp%2010%2022.pdf
\22\ CITL, The Value of Provider-to-Provider Telehealth
Technologies. CITL modeled pre-and post-telehealth costs based on
national baseline number of transports, transport cost, and number of
avoided transports. Annual savings were calculated by subtracting post
telehealth costs from pre-telehealth costs for each provider-to-
provider setting. These savings sum to $1.2 billion.
\23\ Adam Darkins et al., Care Coordination/Home Telehealth: The
Systematic Implementation of Health Informatics, Home Telehealth, and
Disease Management to Support the Care of Veteran Patients with Chronic
Conditions, 10 Telemed. & e-Health 1118, 1118 (2008), available at
http://www.liebertonline.com/doi/pdf/10.1089/tmj.2008.0021?cookieSet=1
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This savings should not be surprising. As the Georgetown study
noted ``online health-related information appears to shift some
proportion of healthcare consumption from acute to precautionary care
(e.g., via increased doctor visits) and to improve health outcomes
(e.g., via reduced hospital stays). As hospital stays are orders of
magnitude more costly than typical doctor visits, it would seem that
providers (i.e., hospitals) and insurance companies have vested
interests in (1) increasing the deployment of broadband technologies,
and (2) insuring the health information available online is timely and
accurate.'' \24\
---------------------------------------------------------------------------
\24\ Macher, Jeffrey T., John W. Mayo and Olga Ukhaneva ``Does the
Internet Improve Consumer Healthcare Behaviors, Georgetown University
working paper, October 29, 2018.
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It is also important to consider how telehealth is becoming more
important for certain geographic areas. In 2010, the Plan noted that
``Video consultation is especially beneficial for extending the reach
of under-staffed specialties to patients residing in rural areas,
Tribal lands and health professional shortage areas (HPSAs)'' and that
at that time sixty-five million people reside in such HPSAs.\25\ The
number of Americans living in HPSAs is, as of March, now 74,383,347,
with rural areas representing nearly 67 percent of such areas.\26\ This
is a problem that is likely to get worse. Since 2005, 104 rural
hospitals have closed and more than 600 additional rural hospitals--30
percent of all rural hospitals in the U.S.--are at risk of closing in
the near future, according to the Center for Healthcare Quality and
Payment Reform.\27\ There is also a problem with rural hospitals losing
services. For example, Texas has seen the greatest number of rural
hospital closures, at 25, but also the greatest number of rural
hospitals losing services, at 101.\28\
---------------------------------------------------------------------------
\25\ https://transition.fcc.gov/national-broadband-plan/national-
broadband-plan.pdf Section 10.1
\26\ Bureau of Health Workforce Health Resources and Services
Administration (HRSA) U.S. Department of Health & Human Services.
BCD_HPSA_SCR50_Qtr_Smry.pdf
\27\ https://www.beckershospitalreview.com/finance/states-with-the-
most-rural-hospital-closures.html
\28\ Ibid.
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In short, there are many ways that telehealth can reduce costs and
improve outcomes. This is not really a debatable point. As a recent
witness \29\ testified at a House hearing on telehealth, there is now
substantial research demonstrating improved outcomes and access across
numerous specialties and a vast array of healthcare services published
in recent years.\30\
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\29\ The witness was Lee Schwamm, MD, FAHA, the Associate Dean of
Digital Strategy & Transformation at the Yale School of Medicine and
the Senior Vice President and Chief Digital Health Officer for the Yale
New Haven Health System. The witness is also a professor of Neurology
and Biomedical Informatics & Data Sciences.
\30\ The testimony can be found at https://democrats-
energycommerce.house.gov/sites/evo-sub
sites/democrats-energycommerce.house.gov/files/evo-media_document/
Lee%20Schwamm_Wit
ness%20Testimony_04.10.2024.pdf. The testimony cited referred to a
recent study that can be found at Kevin K Wiley, Johnson J, Coleman C,
Olson C, Chuo J, McSwain SD. Translating Value Across Telehealth
Stakeholders: A Rapid Review of Telehealth Measurement Evidence and a
New Policy Framework to Guide Telehealth Researchers. Telemedicine and
e-Health. April 2, 2024. tps://doi.org/10.1089/tmj.2023.0211
---------------------------------------------------------------------------
Another way to consider potential cost savings is through
McKinsey's finding that ``evidence prior to COVID-19 shows that
telehealth solutions deployed for chronic populations can improve total
cost of care by 2 to 3 percent.'' \31\ Medicaid spending in FY 2022 was
$804 billion.\32\ As to the portion attributable to chronic conditions,
a study on the prevalence and medical costs of chronic diseases among
the adult Medicaid population noted that ``The high prevalence of
chronic diseases is a key driver of total U.S. healthcare costs; in
2010, 86 percent of healthcare spending was for patients with at least
one chronic condition, and 71 percent of spending was for patients with
multiple conditions.'' The study further noted that ``Medicaid has
primarily covered low-income children and parents, pregnant women, and
the disabled. This population is vulnerable to higher rates of chronic
diseases than are seen in the U.S. as a whole or even in the low-income
population overall.'' \33\ Assuring that all Medicaid recipients had
access to broadband could, under that analysis, save Medicaid billions.
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\31\ https://www.mckinsey.com/industries/healthcare/our-insights/
telehealth-a-quarter-trillion
-dollar-post-covid-19-reality
\32\ https://www.kff.org/medicaid/state-indicator/total-medicaid-
spending/?currentTimeframe
=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
\33\ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5798200/
---------------------------------------------------------------------------
One could also add savings to the government related to the
Veterans Administration. Military families make up nearly half of all
ACP recipients.\34\ The Veterans Administration budget is about $302
billion with 42 percent, or $126 billion, allocated to healthcare.\35\
Redesigning the system to assure that all veterans can take advantage
of telehealth could add additional savings.
---------------------------------------------------------------------------
\34\ https://www.whitehouse.gov/briefing-room/statements-releases/
2024/02/06/fact-sheet-as-
affordable-connectivity-program-hits-milestone-of-providing-affordable-
high-speed-internet-to-23-
million-households-nationwide-biden-harris-administration-calls-on-
congress-t/
\35\ https://www.pgpf.org/blog/2024/04/spending-on-veterans-in-the-
budget
---------------------------------------------------------------------------
None of these studies are ACP focused. But it is reasonable to
extrapolate savings on chronic conditions, mortality, hospital stays,
emergency room visits, transport, and many other healthcare services.
After all, no demographic group is immune from the need for such
services. And indeed, as noted above, there are certain savings likely
to be greater on a per capita basis for the ACP population than for the
general public, such as with monitoring chronic conditions.
Having said that, you are correct in quoting me to the extent that
I am not a health economist. The studies cited above suggest that I am
directionally correct, but I recognize that there are ways to refine
those numbers to provide a more complete and accurate assessment of the
potential improvement of outcomes and lower costs of government insured
health care if all were connected.
What I hope we could all agree on is that it would be helpful in
the context of not just the ACP debate--but also for the future of
Medicare, Medicaid, and the Veterans Administration--for the
Administration and/or Congress to seek an authoritative study on the
issue. I think it should be framed in terms of what COVID has taught us
about the future of healthcare delivery. That episode accelerated the
movement to online healthcare, and it would serve many public policy
purposes to have such a study.
In doing that study, we should incorporate the wisdom of Wayne
Gretzky, who famously said that the key is to skate to where the puck
is going. So here, there is a movement by multiple stakeholders to use
telehealth generally to improve outcomes and lower costs. We should not
only understand that movement, but we should restructure our
government's healthcare insurance policies (Medicare, Medicaid, and
medical services provided by the Veterans' Administration) to take
advantage of the opportunities created by modern communications
technology. After all, as discussed in my testimony, broadband is a
general-purpose technology that produces productivity gains throughout
different sectors of the economy. The cost of providing it to those who
cannot currently afford it is relatively small compared to the economic
gains that such access would provide, in healthcare and other areas.
In this regard, let me point to and praise the House Ways and Means
Committee for its recent passage of the Preserving Telehealth,
Hospital, and Ambulance Access Act by a vote of 41-0 and the House
Health Subcommittee of the Energy and Commerce Committee for its
unanimous vote supporting the Telehealth Modernization Act of 2024. I
hope the House and then the Senate follow. These Acts extend numerous
provisions adopted to address healthcare needs clearly demonstrated
during the COVID crisis.
Two points about it are particularly notable for our discussion of
the ACP. First, the legislation recognizes that while the COVID
emergency is over, the movement to online delivery of essential
services is not. Second, it did not make the changes permanent. It
created extensions, so that legitimate issues raised in the debate
could be studied before adopting more permanent rules. There is wisdom
in both that applies to the ACP; a recognition of the importance of
telehealth for healthcare delivery and the willingness to keep the
status quo while studying the details before adopting longer-term
rules.
But perhaps the most important message from the unanimous votes in
the Committees is this. While the House has many issues on which there
is huge canyons separating the views of the members, it is apparently
in agreement that increased access to telehealth will result in
improved outcomes and/or lower costs. If not, why would they have voted
to provide increased access to telehealth? And if so, don't we want all
lower income American families whose health insurance is provided by
the government to take advantage of the efficiencies that the House
Committees clearly saw in their unanimous actions to extend the
telehealth provisions?
In short, given the amount the United States spends on Medicare and
Medicaid, universal, sustainable broadband should be seen as a huge
opportunity to improve health outcomes while lowering costs. We should
seize that opportunity.
b. Please specify what you mean by ``sometime in the near future.''
Answer. There are many variables that can affect the timing of any
technology trend, including government policies. But given the trends
that I see in communications, artificial intelligence, and healthcare
delivery, I think in 3-5 years it should be clear that just as being
online is, in Congress' words, ``essential to full participation in
modern life in the United States'' and the affordability barrier to
adoption is a barrier to the ``equitable distribution of essential
public services, including health care,'' it will be clear that every
provider of health insurance will want to make sure all the persons
they cover have in home access to telehealth.
Question 3. You testified that investing in ACP ``may actually
result in a. . .net cost savings to the government.''
a. What evidence do you have to support this claim?
Answer. Please see the answer to question 2a for some of the
evidence. As noted, the savings from reductions in the cost of Medicaid
alone could result in a net gain to the government. And that does not
incorporate savings from Medicare, the Veterans Administration, and
other government-funded healthcare programs.
Further, there are other savings related to other government
programs. For example, as noted in my written testimony, for lower-
income individuals, adopting in-home broadband increases their
likelihood of employment by 14 percent, with 62 percent of those newly
connected households citing the connection as having helped them or a
family member successfully find employment.\36\ This trend, applied
across all ACP recipients, would reduce the cost of unemployment
insurance.
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\36\ https://www.aeaweb.org/articles?id=10.1257/pol.20190648
---------------------------------------------------------------------------
Another set of savings would be found in the administration of
government services. The U.K. government, for example, estimated that
it could save up to several billions by shifting 80 percent of public
services online, with savings likely to come from four key areas: the
reduced staff time involved in processing digital transactions compared
to offline alternatives; estates and accommodation; postage, packaging,
and materials; and the costs of supporting IT systems. Among the more
dramatic findings were that the cost of digital transactions was 20
times lower than by phone and 50 times lower than face to face.\37\ As
a study from the consulting group BCG pointed out, online government
services can also spur job creation and economic growth. For example,
when new businesses have a simple path for filing documents and
obtaining licenses, barriers to entry are lowered and growth
increases.\38\
---------------------------------------------------------------------------
\37\ https://www.gov.uk/government/publications/digital-efficiency-
report/digital-efficiency-report
\38\ Awad, N., Brice, J., Ferrer, S., Kim, H. & Stuart, T. (2022).
Delivering government services like a digital native. Boston Consulting
Group. https://www.bcg.com/publications/2022/delivering-customer-
centric-digital-government-services.
b. Would the net cost saving be immediate? Or would it be down the
road?
Answer. It would, if administered properly, be immediate. In
particular, I would expect savings in healthcare, job training and
placement, and government services to be immediate upon effective
adoption.
Savings related to education are more long term.\39\ For example,
an analysis from Common Sense Media extrapolated from the previously
mentioned study from Michigan State University showing the effect of
connectivity and devices on student performance to show a GDP loss of
$22b-$33b attributable to bad student connectivity.\40\
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\39\ In my oral testimony I mentioned how in the early 2000s, my
sister, a public-school teacher pointed out my work at the FCC resulted
in difficulties for her in that many of her students were using
Internet access to do their homework while others did not have access.
That problem continues. As Common Sense Media has pointed out ``Over 40
percent of Title I teachers do not assign work that requires Internet
access because they fear that doing so would exacerbate inequalities,
and nearly 60 percent report that a lack of home Internet and computers
limits student learning.'' Fazlullah, A. & Ong, S. (2019). The homework
gap: Teacher perspectives on closing the digital divide. Common Sense
Media. https://www.commonsensemedia.org/sites/default/files/featured-
content/files/homework-gap-report-2019.pdf. My point for raising it
here is to note that while I would hope we could all agree that those
fears and the failure to assign certain kinds of homework will be
negative for our economy down the road, it is difficult to be precise
about the timing and scope of those costs.
\40\ https://www.commonsensemedia.org/sites/default/files/research/
report/final_-_what_it
_will_take_to_permanently_ close_the_k-12_
digital_divide_vfeb3.pdf#page=7
---------------------------------------------------------------------------
But the key point policy makers should understand that whatever the
savings there are today, those savings are likely to grow down the
road.
Let me add that in answering your questions two and three, I
recognize that we should all be humble in understanding that many
factors, some unknowable today, can affect future outcomes. But while
we cannot know for future what the future holds, we nonetheless must
move forward by making reasonable predictions. For the last quarter
century, most of my work has been with institutional investors who
every day make investments based on their predictions of the future.
Some turn out to be true; others don't. But those in that business
don't have the luxury of throwing up their hands and simply saying
``who knows?''
Neither does the Congress. I think Congress was right to invest
$42.5 billion in rural broadband deployment, but one could argue that
it should have waited until we were sure wireless would not offer the
same functionality. Waiting, however, carries its own costs,
particularly when the evidence is strong that fiber is far more future
proof. As for the adoption side, as discussed above, I am for more
through study. But as of now, the data is very clear that directionally
there are significant savings to be had today from getting all
Americans online and there will be more savings in the future.
Ecclesiastes suggested that the race is not always to the swift nor the
battle to the strong.\41\ Still, as Damon Runyon noted, ``but that's
the way to bet.'' So here, we as a country should be betting on savings
from online services growing over time.
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\41\ Ecclesiastes 9:11.
Question 4. During the hearing, you claimed there was a study by
John Horrigan which estimated that for ``every dollar spent on ACP, we
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get a $3.89 increase in GDP.''
a. Is there a John Horrigan paper that finds this conclusion? If
yes, please provide a citation for this study.
Answer. In my written testimony I cited Dr. Horrigan's paper as
saying, ``Another study found that `every dollar of ACP subsidy returns
nearly two dollars in impacts to those using the program' due to
`employment effects that boost household income; and convenience
effects, e.g., time saved from shopping online as well as having access
to a greater variety (or quality) of goods.' '' The title of that study
is ``The Affordable Connectivity Program Creates Benefits that Far
Outweigh the Program's Costs.'' \42\
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\42\ https://www.benton.org/publications/affordable-connectivity-
program-benefits-outweigh-costs.
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In that written testimony I cited a different paper related to the
finding on the increase in the GDP.
To the extent that my oral testimony implied something different
than my written testimony, that is my error for which I apologize.
I would note, however, that there are other studies that come to
similar findings about how universal broadband access and adoption can
increase the GDP. For example, a 2021 paper published by the National
Bureau of Economic Research found that ``moving to high-quality, fully
reliable home Internet service for all Americans (``universal access'')
would raise earnings-weighted labor productivity by an estimated 1.1
percent in the coming years. The implied output gains are $160 billion
per year, or $4 trillion when capitalized at a 4 percent rate.'' \43\
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\43\ https://www.nber.org/papers/w29102
b. John Horrigan has published a ``brief,'' in which he provides an
``exploration'' of existing data to develop a benefit-cost analysis.
According to this brief, ``This exploration finds that every dollar of
ACP subsidy returns nearly two dollars in impacts to those using the
program.'' Is this the paper you meant to discuss during your
testimony?
Answer. As noted above, that is the brief to which my written
testimony refers, and it is the brief to which I meant to refer to in
my oral testimony.
c. In this brief, Mr. Horrigan states that the FCC's survey finds
that only 22 percent of the ACP recipients did not have Internet prior
to ACP. Do you also agree that this is the finding of the FCC survey?
Answer. I believe that the single data point misrepresents Dr.
Horrigan's analysis and the historical record.
A fair reading of Dr. Horrigan's work would start by adopting his
insight that ACP is part of a three-legged stool that during the
pandemic helped increase broadband adoption and sustain it for low-
income households. Philanthropic and private sector initiatives were
important, but the EBB and then the ACP were crucial in making these
efforts have an impact on a national scale.
It is then important to consider how Dr. Horrigan describes that
ACP's predecessor EBB is an important historical antecedent that, if,
taken into account, would increase that number of households that were
not connected prior to a government subsidy program. As he writes, ``It
is hard to escape the fact that pandemic era initiatives (such as
stimulus checks, the EBB, private-sector marketing initiatives, and
philanthropic efforts) were responsible for getting a large number of
low-income households online. The ACP not only sustained this, but
helped low-income households weather a 2022 that saw a growth in
inflation, the end of the child tax credit, and other economic
headwinds. It is worth noting that the data only takes us through 2022
and it is likely that 2023 ACP signups included significant numbers of
wireline customers.'' \44\
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\44\ https://www.benton.org/sites/ default/files/ACP-Cost-
Benefit_0.pdf
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Further, Dr. Horrigan writes that based on his analysis of American
Community Survey data from 2019-2022, 56 percent of the growth in home
wireline broadband subscriptions in that time was among households
whose annual incomes were $50K or less. And 38 percent of the growth
was from ``under $25K households'' (that make up about 16 percent of
all households).\45\ ACP and EBB were partly responsible for this.\46\
---------------------------------------------------------------------------
\45\ A 2023 USC survey of California made similar findings. https:/
/broadbandforall.cdt.ca.gov/wp-content/uploads/sites/19/2023/12/2023-
Statewide-Digital-Equity-Survey-Final-Remediated-Report.pdf#page=19
\46\ https://www.benton.org/sites/default/files/ACP-Cost-
Benefit_0.pdf
---------------------------------------------------------------------------
Dr. Horrigan also urges policy makers to understand that a high
percentage of ACP recipients are returning and intermittent users,
writing for example ``Many low-income households have at one time had
their Internet subscription lapse. Estimating just how many low-income
households are likely to cycle on and off home connectivity in a given
year is a crucial step in determining the overall benefit of the
program.'' \47\
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\47\ https://www.benton.org/sites/default/files/ACP-Cost-
Benefit_0.pdf
---------------------------------------------------------------------------
He then suggests that policymakers ask, ``How many more consistent
broadband subscribers did ACP create?'' He answers that question by
writing:
Surveys conducted during the pandemic showed that 29 percent
of Internet users with annual incomes below $30,000 (or nearly
5 million households) lost service due to the economic
challenges the pandemic imposed upon them.
That survey looked not just at those who lost service but
also at the past subscription patterns of those currently
lacking service. Some 31 percent of those without a home
wireline subscription had had service in the past.
Another view of the comings-and-goings of connectivity comes
via data from surveys that ask people without service if they
had had a home subscription previously. The National
Telecommunications and Information Administration's (NTIA) 2021
Internet Use surveys found that 23.5 percent of households
without Internet subscriptions had household members who had
previously been home Internet users. ·
If 30 percent of wireline ACP enrollees restore service they
once had, this comes to about 2.4 million ``returning user''
households--30 percent of the 8 million wireline ACP enrollees
who are not new broadband households due to the benefit.\48\
---------------------------------------------------------------------------
\48\ https://www.benton.org/sites/default/files/ACP-Cost-
Benefit_0.pdf
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In short, the 22 percent number is a snapshot in time that ignores
critical data from both before and after the snapshot was taken.
Question 5. Your written testimony cites a 2021 article from the
American Economic Journal: Economic Policy. That study is not based on
ACP but instead is based on information from a Comcast program from
2012-2018.
a. Given that private low-income plans like Internet Essentials and
Spectrum Internet Assist were available in the majority of the country
prior to ACP, doesn't that suggest that a $30 nationwide subsidy isn't
universally necessary, and that ACP should be better tailored to
account for local offerings and the presence of competition?
Answer. I applaud private efforts to address low-income adoption,
particularly Comcast's Internet Essentials, which is the oldest and
most extensive program. To reiterate a point that I made in my answer
to question 1b, Comcast started the program in 2011 and has continually
studied and changed the program to improve its outcomes. That is the
path the FCC and Congress should follow with the ACP.
But the question ignores how the ACP, by focusing on improving the
demand side of the equation, improved the supply side of low-income
offerings. ACP caused the private sector to improve the quality of
their offerings to lower income Americans--both in terms of the price
actually paid by the consumer and the quality of the service--in
response to greater aggregate demand from lower-income households.
Moreover, I don't think that private efforts alone will solve the
problem of universal broadband, in the same way that the admirable
private efforts providing meals for the hungry would not eliminate the
need for SNAP or the commendable charitable efforts related to
healthcare would not eliminate the need for Medicaid.
As to the dollar amount that the government subsidy should provide,
I would hope that the FCC economists, who are capable of great work,
would take the data from the EBB and ACP programs and provide an
analysis to Congress about the two variables of the eligibility
criteria and price point.\49\ I would further hope that the analysis
would evaluate the trade-offs for different combinations.\50\ I would
also hope that the FCC could evaluate and determine if there are
various ways to lower the cost structure for providers and benefit from
that in terms of lowering the price point and structure its programs
and advise Congress accordingly.\51\
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\49\ Some have suggested a different variable of eligibility being
based on not previously being on broadband. I would hope those
advocating that position would acknowledge that the current law does
not make that requirement. I would also hope they would have the
decency to articulate how they think it would be administered. I think
such a requirement would be an administrative nightmare for the ISPs
and the recipients.
\50\ On this point, the Committee might review Dr. Horrigan's 2021
affordability study which supports the ``one size does not fit all''
finding on the price point, as different people in the same income
bracket had very different views as to what they would be willing to
pay to obtain a broadband service. https://static1.squarespace.com/
static/5aa8af1fc3c16a54bcbb0415/t/61ad77
22de56262d89e76c94/1638758180025/
EveryoneOn+Report+on+Affordability+%26+the+Digital+
Divide+2021.pdf
\51\ In this regard, I might reference the current debate occurring
at the FCC over ``bulk billing'' practices in which various parties are
arguing that bulk billing enables lower prices while some are arguing
the opposite. My point is not to weigh in on the merits of that debate
but to suggest the debate appears to show evidence that there may be
ways, through the aggregation of demand, to lower prices.
---------------------------------------------------------------------------
As to tailoring the program for local offerings, I am not sure what
the question is implying. But if it should be read to imply that we
should have a different program for areas served by different ISPs, I
would be opposed. I don't see why we would subsidize Comcast
subscribers differently than Charter, AT&T or Verizon subscribers. I
think such a program would be administratively chaotic and lead to
problematic and inefficient incentives.
As to focusing on competition, I support improved market-based
competition. Indeed, we are seeing significant market-based efforts to
upgrade copper networks to fiber that I believe will improve broadband
prices and offerings for tens of millions of Americans.
But no one should be under the illusion that the increased fiber
competition to cable will result in entry level prices sufficient to
result in low-income Americans increasing their levels of adoption.
Noted telecom economist Dr. Scott Wallsten of the Technology Policy
Institute analyzed the data relating to fiber-cable competition and in
a 2021 paper demonstrated that additional cable-fiber competition does
not bring the unconnected online.\52\
---------------------------------------------------------------------------
\52\ https://techpolicyinstitute.org/wp-content/uploads/2021/05/
Does-Competition-Between-Cable-and-Fiber-Increase-Adoption.pdf.
---------------------------------------------------------------------------
Again, as I said in my written and oral testimony, I am in complete
agreement with the 20 House Republicans who wrote Speaker Johnson last
month asking for action on ACP, saying ``We believe that bipartisan
solutions are within reach to ensure uninterrupted access to the ACP
while concurrently pursuing long-term funding strategies.'' That is, I
would hope Congress would provide an ACP extension and then, as part of
a larger and necessary Universal Service Fund reform effort, design a
more efficient and sustainable program that moves us toward universal
adoption.
Question 6. Your written testimony cites several studies regarding
telemedicine. Most of these studies are based on information that
predates ACP, and none of the studies cite ACP as a benefit.
Telemedicine may be a great benefit to Americans, but the studies cited
indicate that it would have been a great benefit without ACP.
a. What evidence exists that households, who were not previously
purchasing Internet and are now doing so through ACP, have used the
Internet to access telemedicine?
Answer. First, the record shows that ACP recipients regard using
access to broadband as critical to their healthcare. A recent study
found that 75 percent of ACP participants fear that losing access to
ACP will result in losing access to healthcare.\53\ This is consistent
with another large-scale survey found that 45 percent of adults believe
that inadequate access to technology, including broadband and
computers, is a barrier to telehealth, and this was especially
prominent among rural residents and adults over the age of 65.\54\ That
is, ACP recipients and the public generally understand that today
broadband access is critical to obtaining healthcare services.
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\53\ https://www.bsgco.com/acp-fact-sheet
\54\ Bailey, V. (2021). Limited broadband poses a significant
barrier to telehealth access. MHealthIntelligence. https://
mhealthintelligence.com/news/limited-broadband-poses-a-significant-
barrier-to-telehealth-access.
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Second, there are numerous media reports of ACP recipients using
and depending on Internet access for healthcare.\55\ While I am aware
that anecdotes are not the same as data, there should not be any doubt
as to the impact of ACP on the use of telehealth.
---------------------------------------------------------------------------
\55\ See, for example, https://kffhealthnews.org/news/article/
internet-subsidy-ending-affordable
-connectivity-program-telehealth/ or https://www.cnet.com/home/
internet/americans-are-facing-a-mental-health-crisis-losing-the-
internet-wont-help/
---------------------------------------------------------------------------
Third, there is evidence that when lower income persons have
broadband access, they tend to use it for healthcare more than the
general population. For example, the Georgetown study noted above found
that ``consumers who face greater financial constraints (e.g., those
with high deductible healthcare plans or who delay healthcare to save
money) are more likely to use eHealth. This finding suggests that
eHealth provides a tool for altering and potentially improving consumer
healthcare decision-making--especially for those who most acutely bear
healthcare costs.'' \56\
---------------------------------------------------------------------------
\56\ Macher, Jeffrey T., John W. Mayo and Olga Ukhaneva ``Does the
Internet Improve Consumer Healthcare Behaviors, Georgetown University
working paper, October 29, 2018.
---------------------------------------------------------------------------
Fourth, while I agree with the comment that ``Telemedicine may be a
great benefit to Americans, but the studies cited indicate that it
would have been a great benefit without ACP,'' we should not be blind
to the fact that the United States government, through Medicare,
Medicaid, and the Veterans Administration, is the largest provider of
health insurance in the country. If the general public and private
insurers benefit from telehealth, then the government, as a provider of
health insurance, would benefit as well, particularly given the overlap
of those depending on ACP and those depending on Medicaid and Veterans
Administration services.
Fifth, the question implies that ACP recipients might regard the
value of telehealth differently than other broadband subscribers. There
is no evidence that this is true. To the contrary, there is evidence
that among those connected, telehealth is quite popular. For example, a
study showed that among patients who recently used telehealth, 73
percent reported they would continue to use telehealth services in the
future, while 41 percent reported they would have chosen telehealth
over an in-person appointment, even if both required a co-pay.\57\
Again, there is no reason to believe that ACP recipients would view the
benefits of telehealth differently.
---------------------------------------------------------------------------
\57\ https://www.ama-assn.org/practice-management/digital/patients-
doctors-telehealth-here-s-what-should-come-next
---------------------------------------------------------------------------
Sixth, with respect, I think the question ignores the wisdom, cited
before, of skating to where the puck is going. Not only do we need ACP
for telehealth, but we should also be looking for ways in which we can
use telehealth for all Americans to improve outcomes and reduce costs.
At the recent House hearing on telehealth cited above, the expert on
telehealth correctly noted that ``Congress should focus on facilitating
improved access to high-quality, integrated telehealth services by
strengthening broadband access for disadvantaged and rural populations,
establishing digital health literacy programs, conducting research to
demonstrate the value of telehealth services (particularly hybrid
telehealth modalities), and promoting payment models that increase
adoption of well-integrated telehealth services focused on chronic
disease management, longitudinal care, and service for disadvantaged
populations.'' \58\
---------------------------------------------------------------------------
\58\ https://democrats-energycommerce.house.gov/sites/evo-subsites/
democrats-energycommerce
.house.gov/files/evo-media-document/
Lee%20Schwamm_Witness%20Testimony_04.10.2024.pdf
---------------------------------------------------------------------------
The bottom line is that we should think of ACP as an essential
piece of the puzzle for addressing healthcare needs in our country in
an effective and efficient manner. And we should not neglect the fact
that we also must put together the entire puzzle.
Question 7. Your written testimony states: ``But of course, if ACP
goes away, those savings will also go away and to put a fine point on
it, it is a mathematical certainty that there will be communities in,
for example, Texas that instead of getting fiber will end up with fixed
wireless or even satellite.''
a. Please provide specific numbers and equations that support the
``mathematical certainty'' portion of your statement.
Answer. The key points to my answer are briefly summarized
immediately below, with a more complete answer provided thereafter.
The BEAD program does not fund the cost of deployment
broadband to an unserved or underserved area; rather it funds
the difference between the cost of deployment and what a
provider would be willing to invest to serve that area.
ACP increases the revenue for any such area, those closing
the gap described above and decreasing the amount of BEAD
funding necessary for that specific area, making the funds
available for other areas.
BCG found that ACP reduces the amount needed to incentivize
ISP investment by about 25 percent per location or $500.
A conservative projection indicates that the number of
locations that will miss out on the opportunity to obtain fiber
due to the end of the ACP program will be at least 47,705,
though the actual number is likely to be larger.
As I noted in my written testimony, the consulting group BCG found
that ACP reduces the subsidy needed to incentivize providers to build
in rural areas by 25 percent per household, writing ``the existence of
ACP, which subsidizes subscriber service fees up to $360 per year,
reduces the per-household subsidy required to incentive ISP investment
by $500, generating benefit for the government and increasing the
market attractiveness for new entrants and incumbent providers.'' \59\
---------------------------------------------------------------------------
\59\ https://www.commonsensemedia.org/sites/default/files/research/
report/2022-cs-bcg-closing-digital-divide_final-release-3-for-web.pdf
---------------------------------------------------------------------------
This makes sense from a capital markets perspective. After all,
BEAD is not designed to fund 100 percent of the cost of any deployment.
It will fund the difference between the cost of the deployment and what
the private market would have paid to deploy a network to serve a
designated geographic area. The greater the revenue, and hence likely
profit, that the area would provide, the greater the private market's
willingness to invest, reducing the amount of BEAD funding necessary
for the specific project.\60\
---------------------------------------------------------------------------
\60\ There may be areas where the revenue prospects are so low that
there are no bidders willing to put in any of their own capital and
BEAD does have to fund 100 percent of the capital costs. But those are
likely to be relatively rare and are not important to the answer to
this question.
---------------------------------------------------------------------------
So, let's apply this to the situation in Texas, using numbers
provided in a January 2024 report by Cartesian, a consulting group, and
ACA, a trade association representing small cable providers.\61\
---------------------------------------------------------------------------
\61\ The report can be found at https://www.cartesian.com/wp-
content/uploads/2023/02/Texas_BEAD_Funding_Cartesian_
ACA_Jan_2024_v4.0.pdf
---------------------------------------------------------------------------
Texas, under the Infrastructure Bill's BEAD formula, will receive
$3.3 billion, with an obligation to use the funds to connect all
unserved locations and, if there are additional funds, to connect all
underserved locations.
Cartesian finds that Texas has 364,700 unserved locations and
199,100 underserved locations. The current number is higher,\62\ but
the FCC's RDOF and EACAM programs are currently set to serve 322,434
unserved and underserved Texas locations.\63\ Thus, that leaves
approximately 563,800 locations as the responsibility of BEAD funds.
---------------------------------------------------------------------------
\62\ Slide 2.
\63\ This number was provided to me from Mike Conlow, whose
Substack on BEAD has been a valuable source of information for those
involved in the BEAD process.
---------------------------------------------------------------------------
Cartesian estimates that the ISPs bidding for BEAD funds will
provide $1.6 billion for the projects,\64\ bringing the total to be
utilized for the capital expenditures of deployment to $4.9 billion.
That would average out to about $8,675 per location, though in reality
there is a wide variation in the actual cost to serve different
locations. Cartesian estimates that the average private sector
contribution would be $2,903.\65\
---------------------------------------------------------------------------
\64\ Slides 2 and 4.
\65\ Slide 4. I am not sure how Cartesian arrived at that number.
When I ran the numbers, I assumed the $1.6 billion in the private
sector contribution, if distributed equally among the 563,800 unserved
and underserved locations, would be $2,837. Cartesian likely weighed
the unserved and underserved in a manner that is slightly more accurate
so I will use their number for the average private sector contribution.
---------------------------------------------------------------------------
However, it costs more than $8,675 to connect the average location
to a fiber connection. Cartesian estimates that it will cost, on
average, $12,399 to connect an unserved location to fiber and an
average of $10,468 to connect an underserved location to fiber.\66\
Therefore the BEAD contribution necessary for unserved locations would
need to be $9,562 \67\ and the BEAD contribution for underserved
locations would need to be $7,631.\68\
---------------------------------------------------------------------------
\66\ Slide 5.
\67\ That number is derived by subtracting the average private
sector contribution ($2,903) from the average cost of the connecting an
unserved location ($12,399.)
\68\ That number is derived by subtracting the average private
sector contribution ($2,903) from the average cost of the connecting an
undeserved location ($10,468.)
---------------------------------------------------------------------------
Again, according to BCG, reduces the per-household subsidy required
to incentive ISP investment by $500.\69\ Assuming the Cartesian study
assumed a continuation of ACP,\70\ the BEAD contribution must be
increased by $500, so the amount necessary for unserved locations would
be $10,062,\71\ and the amount for underserved locations would be
$8,131.\72\
---------------------------------------------------------------------------
\69\ I could have also used the 25 percent factor but after
consulting with the authors of the study, I decided to use the more
conservative number.
\70\ The Cartesian study does not discuss its assumption on ACP,
but I contacted the co-authors at ACA who told me that while the study
didn't directly address ACP in the cost modelling, one could argue that
it assumes that ACP--or a successor program--remains in place.
\71\ This number represents the sum of $9,562 plus $500.
\72\ This number represents the sum of $7,631 plus $500.
---------------------------------------------------------------------------
This then leaves us with four relevant numbers:
The average BEAD subsidy with ACP needed for a fiber
connection to an unserved location at $9,562.
The average BEAD subsidy without ACP needed for a fiber
connection to an unserved location at $10,062.
The average BEAD subsidy with ACP needed for a fiber
connection to an underserved location at $7,631.
The average BEAD subsidy without ACP needed for a fiber
connection to an underserved location at $8,131.
There is an interesting question as to whether Texas will
prioritize connecting the unserved or the underserved to fiber. The
state will likely try to optimize for both, with some percentage of
both being forced to rely on fixed wireless or satellite. While that
optimization will affect the math, it will not affect the conclusion
that thousands of locations that would have been connected to fiber if
ACP were to continue would have to be connected to an alternative.
For purposes of answering the question, let us assume that Texas
will prioritize connecting all the unserved locations to fiber and use
any remaining amount to connect as many underserved locations as
possible to fiber. To connect all the unserved locations with fiber
with ACP continuing would cost $3.487 billion.\73\ Subtracting that
amount from the total available capital funds of $4.9 billion would
leave $1.413 billion. Using that to connect unserved locations would
enable Texas to connect 185,165 such locations, leaving only 13,935
underserved locations unconnected with fiber.\74\
---------------------------------------------------------------------------
\73\ That number is derived by multiplying the 364,700 unserved
locations by $9,562.
\74\ That number is derived by dividing the $1.413 billion by the
average $7,631 for each underserved location.
---------------------------------------------------------------------------
Now let's compare that to the result if ACP goes away. To connect
all the unserved locations to fiber would cost $3.669 billion,\75\
leaving only $1.231 billion to connect underserved locations.\76\ That
sum would only be enough to connect 151,395 underserved locations.\77\
---------------------------------------------------------------------------
\75\ That amount is derived by multiplying the 364,000 unserved
locations by $10,062.
\76\ That number is derived by subtracting the amount necessary to
connect all the unserved homes ($3.671 billion) from the total capital
Cartesian projects will be available ($4.9 billion.)
\77\ That number is derived by dividing the available $1.228
billion by the average cost of connecting an underserved location to
fiber of $8,136.
---------------------------------------------------------------------------
In short, ACP going away would result in at least 47,705
underserved locations not receiving fiber but being connected with
another type of network, such as fixed wireless or satellite.\78\
---------------------------------------------------------------------------
\78\ That number is derived by subtracting the number of
underserved homes that can be reached by fiber under the scenario
without ACP from the total number of underserved homes that could be
connected to fiber if ACP were to continue (184,782 minus 33,779.)
---------------------------------------------------------------------------
The actual number of underserved locations that will end up with
wireless rather than fiber is likely to be materially larger. Under the
terms of the BEAD program, Texas must connect all unserved and
underserved locations. So, if ACP were to continue, the 13,935
underserved locations would still have to be connected. The cost of
those connections to either fixed wireless or satellite would then
reduce further the number of locations who would obtain a fiber
connection.
As Cartesian does not estimate the cost for a fixed wireless
connection, I did not do that math here of incorporating those costs,
which would be necessary to connect all the remaining underserved
locations.\79\ But whatever the cost of connecting 13,935 underserved
locations to fixed wireless (or satellite), the cost of connecting
47,705 underserved locations would be more than triple, meaning that
even more underserved locations would be forced to settle for fixed
wireless rather than fiber if ACP funding ends.
---------------------------------------------------------------------------
\79\ The math is complicated as comparing fixed wired deployments
to fixed wireless deployments do not yield an apples-to-apples cost
comparison. Further, while fixed wireless is cheaper to deploy, it's
operating costs are more expensive.
---------------------------------------------------------------------------
Further, using the 25 percent figure would have resulted in a
significantly higher number of homes that Texas would be forced to
connect with fixed wireless or satellite.
The bottom line is that while there can be some uncertainty about
the number of homes that will lose out on fiber if ACP, there can be no
uncertainty that tens of thousands of underserved Texas locations will
be forced to connect with a wireless or satellite provider, instead of
fiber, due to the end of the ACP program.
b. The Wall Street Journal, in an article titled ``The $53,000
Connection: The High Cost of High-Speed Internet for Everyone,''
reported that the government is financing fiber-line buildouts that are
higher per location than the value of the home getting the hookup. Why
would it be the case that expensive fiber buildout financed entirely by
the government would need continued cash payments to run a low-
maintenance fiber line?
Answer. The key points to my answer are briefly summarized
immediately below, with a more complete answer provided thereafter.
Congress should be interested in the question of whether
certain subsidies per location are beyond an acceptable limit,
something the National Broadband Plan and the recent NTIA
reauthorization addressed.
In the most low-density areas of the country, there simply
aren't enough customers to generate enough revenue to pay for
the ongoing operating expenses.
The shortfall in operating expenses is likely to only affect
about 2 percent of the locations in the U.S.
That, however, has nothing to do with the ACP. ACP does not
change the cost to deploy; rather it changes the incentives to
deploy.
As to the logic of financing fiber deployments that are more
expensive than the value of the house the deployment is connecting, I
offer two thoughts.
First, the 2010 National Broadband Plan recommended a limit on the
per-house subsidy for deployment, a recommendation I strongly supported
and which the FCC subsequently adopted.\80\ That was aggressively
opposed by rural telephone companies, although in practice the rather
generous limit adopted by the FCC only impacted a very small number of
companies.
---------------------------------------------------------------------------
\80\ For a visual representation of the cost curve for currently
unserved and underserved homes, see the Cartesian slide deck noted
above at slide 3.
---------------------------------------------------------------------------
Moreover, as the Wall Street Journal article you cite documents,
the FCC subsidy dollars per location served ($1,753) is considerably
lower than other Federal programs, such as the Department of
Agriculture's Reconnect program (which averages $9,014 per
location.)\81\ While there are differences in the program that make a
simple dollar to dollar comparison misleading, the differences suggest
that the Senate should follow the wisdom of the recent action by the
House in passing an NTIA reauthorization that included a mandate to
develop a digital divide strategy.\82\ Within that mandate, the House
legislation would require NTIA's proposed strategy to support better
management of Federal broadband programs to deliver on the goal of
providing high-speed, affordable broadband Internet access service to
all individuals in the United States; and synchronize interagency
coordination among covered agencies for Federal broadband programs. I
support the House's proposal and think it would be useful to address
the problem you correctly raise. (I discuss the House's proposal
further in answering part c below.)
---------------------------------------------------------------------------
\81\ https://www.wsj.com/us-news/the-53-000-connection-the-high-
cost-of-high-speed-internet-for-everyone-c903163f
\82\ https://www.congress.gov/bill/118th-congress/house-bill/4510
---------------------------------------------------------------------------
Whatever I personally think today about limits on per location
support mechanisms, however, is irrelevant as the BEAD program is now
the primary mechanism for connecting unserved and underserved
locations. That program does not have an ex-ante limit to the amount of
capex that may be provided to connect locations. The program, however,
wisely incorporates the concept of the ``Extremely High Cost Per
Location Threshold.'' As described by telecommunications expert Carol
Mattey, that concept involves ``a BEAD subsidy cost per location that
determines when states may select a less expensive technology over
fiber. Essentially, the threshold determines where awardees will be
able to use fixed wireless and potentially other technologies. Setting
the threshold lower reduces the opportunity for fiber applicants to
automatically win over non-fiber applicants, which allows finite BEAD
dollars to go further.'' \83\ That is, NTIA's administration of the
BEAD program is addressing the concern you appropriately raise.
---------------------------------------------------------------------------
\83\ https://www.benton.org/blog/setting-extremely-high-cost-
location-threshold-bead
---------------------------------------------------------------------------
Second, I don't see what that issue of extremely high cost per
location thresholds has to do with the ACP's impact on the incentives
to deploy. ACP does not change the cost to deploy; rather it changes
the incentives to deploy. Reasonable minds can differ on whether there
should be a limit on public subsidies to deploy where private market
incentives are not sufficient and if so, what that limit, if any,
should be. On the other hand, it would be axiomatic to anyone who
understands capital markets that continuing the ACP would reduce the
capital gap between what the private sector would be willing to pay to
deploy to an unserved or underserved area and what the cost of the
deployment would be, as discussed in the answer to 7a, immediately
above. In other words, as the BCG study and the mathematical
explanation detailed above demonstrates, whatever is the government
subsidy necessary to deploy to an unserved or underserved location, the
ACP reduces that amount.\84\
---------------------------------------------------------------------------
\84\ There is an interesting question, as government seeks to
accomplish both deployment and adoption, as to what would be the right
ratio of spending on each goal. I have not seen any studies that
evaluate that question but if the government ever decides to again make
new investments in deployment, I hope some evaluation of the right
ratio is undertaken.
---------------------------------------------------------------------------
As to the specific question of whether the ACP subsidy would affect
the ongoing shortfalls in the operating expenses of an ISP deploying to
an unserved or underserved area, a lot depends on the specific
deployment. But policy makers should keep in mind that in the most low-
density areas of the country, there simply aren't enough customers to
generate enough revenue to pay for the ongoing operating expenses.
Maintenance expenses in this context is something of a red herring; the
network operator in the most remote areas must pay backhaul to someone
else to get the traffic to the nearest Internet exchange point. Those
backhaul expenses are operating expenses, not capital expenses. Other
operating expenses that are higher on a per customer basis include such
things as customer care and repairs, as the economies of scale
available in denser areas are lower in less dense areas.
As to data related to how many locations would be affected, a good
source is the 2017 FCC study on the costs of deploying fiber to
locations lacking reliable service using fiber or cable, which at the
time were estimated to be 14 percent of U.S. homes and business
locations. The study found that for the vast majority of these
locations (12 percent out of the 14 percent) the initial subsidy should
be sufficient, noting that ``we do not expect these first 12 percent of
locations will require material ongoing support once the network has
been built, as subscriber revenues should be sufficient to pay for
ongoing network costs.'' The study continued, however, that for the
last 2 percent--representing the costliest locations making up the
difference between 98 percent and 100 percent deployment across the
nation--``there is not enough addressable revenue to cover ongoing
costs, so--in addition to the initial capex--an annual subsidy of about
$2b would be required to keep the networks operating.'' \85\
---------------------------------------------------------------------------
\85\ https://docs.fcc.gov/public/attachments/DOC-343135A1.pdf
---------------------------------------------------------------------------
In short, while it is correct that the operating costs for fiber
are lower than for copper, there still are likely to be low-density
areas where operating subsidies for the rural ISPs are necessary to
maintain economic viability.
c. Indeed, you are quoted in this same article as having said ``The
problem is money is not infinite.'' Are you aware that the Biden
administration has made it clear that it seeks to enroll 40 percent of
Americans in ACP, which could cost American taxpayers $20 billion
annually, just $5 billion less than the annual NASA budget?
Answer. I stand by my observation that money is not infinite.
I would also extend that observation to note that the statement is
as true for the companies my equity research firm covers for
institutional investors as it is for government.
As to the cost of the ACP program, I also stand by my comment at
the hearing and earlier in this document that while I favor an
extension, I would hope that the FCC provides data to Congress so that
Congress, in considering the costs and benefits of the different
Universal Service Fund programs and the trade-offs inherent in
different program designs, can design a more efficient and sustainable
program that moves us toward universal adoption.
As to the benefits and comparisons with NASA, I would just note
that all of us can find programs and expenditures that we believe are
not justified. For example, in 2023, the GAO found that the Federal
government lost an estimated $247 billion in payment errors during the
most recently completed Fiscal Year (FY 2022). According to the report,
``these errors include overpayments or payments that should not have
been made--for example, payments to deceased individuals or those no
longer eligible for government programs.'' \86\ That is an amount more
than 10 times larger than the amount spent on NASA. I am sure everyone
in the Congress could come up with their own list of problematic
expenditures that exceed NASA's budget.
---------------------------------------------------------------------------
\86\ https://www.gao.gov/blog/federal-payment-errors-known-
improper-payments-are-continuing-concern
---------------------------------------------------------------------------
But, with respect, that is not the right way to look at the issue.
It is perfectly fair to ask whether our economy and society is
achieving a benefit that is commensurate with the cost to the public.
It is, however, confusing, rather than helpful, to compare one program
to another without a reference to the benefits.
What would be helpful is for the Senate to follow the wisdom of the
House, which, as noted above, recently passed an NTIA reauthorization
that included a mandate to develop a digital divide strategy.\87\ As
further noted above, within that mandate, the House language would
instruct NTIA to support better management of Federal broadband
programs to deliver on the goal of providing high-speed, affordable
broadband Internet access service to all individuals in the United
States; and synchronize interagency coordination among covered agencies
for Federal broadband programs.
---------------------------------------------------------------------------
\87\ https://www.congress.gov/bill/118th-congress/house-bill/4510
---------------------------------------------------------------------------
This is an admirable and important goal. As the GAO found in 2023,
``Federal broadband efforts are fragmented and overlapping, with more
than 133 funding programs administered by 15 agencies. Among these
programs, 25 have broadband as their main purpose, and 13 of those
programs overlap because they can each be used for the purpose of
broadband deployment. Having numerous broadband programs can be helpful
to address a multifaceted issue like broadband access, but this
fragmentation and overlap can lead to the risk of duplicative support.
However, determining whether program overlap results in duplicative
support can be challenging.'' \88\ For purposes of evaluating the ACP,
we should consider how to better coordinate and administer all Federal
(and to extent practical, state and local) efforts to improve broadband
access, adoption, and utilization, rather than comparing ACP to
unrelated programs.
---------------------------------------------------------------------------
\88\ https://www.gao.gov/products/gao-23-
106818#: :text=What%20GAO%20Found,deployment
%20(see%20fig.). I might add that a report by the National Urban
League, with which I assisted, made a similar point about the need to
coordinate Federal broadband programs. https://nul.org/program/lewis-
latimer-plan
---------------------------------------------------------------------------
As NTIA hopefully conducts its analysis and as Congress responds, I
would again urge Congress to adopt the wisdom of skating to where the
puck is going. Getting the unconnected or the intermittently
sustainably has significant value to our economy and society. Whatever
value it has today is likely to be increased as Artificial Intelligence
and other technology trends accelerate the movement of the delivery of
goods and services to online sources. I am in favor of continually
studying and evaluating both the costs and the benefits. Simple
comparisons to other programs, without any reference to the costs and
benefits does not advance a thoughtful public policy debate.
Question 8. Your written testimony states: ``Recent data
demonstrates that just 32 percent of fourth graders read at or above a
fourth-grade level.'' But your citation to nationsreportcard.gov
provides data over several decades, all of which show that no more than
40 percent of fourth graders in public schools in any year were at
fourth-grade level.
a. Are there problems with our education system that exist beyond
ACP?
Answer. I do not consider myself an expert in education but feel
comfortable in opining that I am 100 percent confident that there are
problems with our education system that exist beyond ACP.
Further, again acknowledging my limited expertise in education, I
feel comfortable opining that there is no single cause for 100 percent
of our problems with our education system.
I am also confident in opining that the lack of broadband in homes
of children attending school will make the problems in our educational
system worse, not better. The fact that the problem of reading scores
pre-dates ACP does not make it less of a problem. Nor does it address
the question of whether ACP can be helpful in addressing low reading
scores, particularly as artificial intelligence develops personalized
ways to assist young readers in overcoming specific decoding problems
that serve as barriers to their learning to read.
Again, I would urge Congress to skate where the puck is going, not
where it is or where it was in the past.
b. A recent report from the National Library of Medicine examines
the harmful effects of too much screen time for children. Do you agree
there are harmful effects of too much screen time?
Answer. I am also not an expert on the impact of too much screen
time for children but based on reading I have done, such as Dr. Haidt's
recent book,\89\ I would agree that there is evidence that should cause
parents and public policy officials to investigate and adopt
appropriate policies. Indeed, I gave a speech that touched on the
subject in February 2023, advocating for a more active role for
government to both study, and depending on the outcome of the study,
address those concerns.\90\
---------------------------------------------------------------------------
\89\ https://jonathanhaidt.com/anxious-generation/. This should not
be seen as an endorsement of the book or its conclusion. I simply cite
it as a serious work addressing what I believe is likely to be a set of
serious issues.
\90\ https://www.benton.org/blog/talking-about-things-we-dont-talk-
about
---------------------------------------------------------------------------
But I admit to being completely perplexed by the logic of the
question in the context of the discussion of the ACP. The seems to
imply that if any kind of screen time can be a problem, we should not
seek to use the tools of technology that use screens in ways that
improve a child's education.
Of course, all technologies have negative consequences. Last year,
40,990 Americans died in car related accidents \91\ but that is not an
argument for banning cars. It is an argument for developing safety
guidelines, such as requiring seat belts and having appropriate rules
of the road to limit such fatalities.
---------------------------------------------------------------------------
\91\ https://www.nhtsa.gov/press-releases/2022-traffic-deaths-2023-
early-estimates#: :text=The%
20agency%20estimates%20that%2040%2C990,the%20second%20quarter%20of%20202
2. As the NHTSA notes, that number represents a decline over the
previous year. The release goes on to discuss various policies designed
to continue the trend toward lowering the number of fatalities.
---------------------------------------------------------------------------
Certain drugs, that can save and improve lives, can also be used in
ways that cause harm. But that is not an argument for banning medically
approved drugs. It is an argument for developing procedures and
safeguards for the distribution of such drugs.
I could cite many similar examples relating to technology but let
me focus on one perhaps closer to the point of the hearing and my
testimony on ACP. Recently Florida adopted a law that bans children
under 14 in the state from having social media accounts and requiring
minors aged 14 and 15 to have parental consent to hold one.\92\
Similarly, Utah adopted a law that tries to address the harm by, among
other things, requires social media companies to verify users' ages and
implement age assurance systems to determine if account holders are
minors and to disable certain features on accounts owned by Utah
minors, including direct messages, sharing features, autopay, push
notifications, and search engine indexing of account profiles.\93\ Ohio
just enacted legislation that limits the use of cell phones in
schools.\94\
---------------------------------------------------------------------------
\92\ https://www.flgov.com/2024/03/25/governor-desantis-signs-
legislation-to-protect-children-and-uphold-parental-rights/
\93\ https://governor.utah.gov/2023/03/23/gov-cox-signs-bills-
focused-on-social-media-in-utah/
\94\ https://education.ohio.gov/Media/Ed-Connection/May-20-2024/
Governor-DeWine-signs-
bill-requiring-Ohio-
schools#: :text=Last%20week%2C%20Ohio%20Governor%20Mike,phones%20
in520K%2D12%20schools.
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My point is not to endorse any specific legislation but to
highlight that while these states, to their credit, are taking the
concerns about screen time seriously and developing different
solutions, they are, at the same time, recognizing that communications
technology can play an important role in education. Indeed, those
states spend hundreds of millions on technology related to education,
suggesting a balanced approach to addressing both the opportunity and
the potential problems screens can present for school children.\95\
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\95\ A more comprehensive answer to concerns about screen time and
the relationship between those concerns and the educational potential
of technology in the classroom can be found in a letter from The
Schools, Health & Libraries Broadband (SHLB) Coalition, the American
Library Association (ALA), and the Consortium for School Networking
(CoSN) to the FCC relating to the E-Rate program. https://
assets.noviams.com/novi-file-uploads/shlbc/PDFs_and_Documents
/E-rate_and_ecf/SHLB-COSN-ALA_Response_to_Heritage_on_Hot_Spots-
FINAL.pdf
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And we should recognize the importance of in-home connectivity for
students to be able to do their best in their educational pursuits.\96\
For example, even before the pandemic, numerous surveys and studies
demonstrated that students without access to the Internet at home were
at an educational disadvantage \97\ A different study using Census
Bureau data estimated that individuals with greater access to a
computer and the Internet at home spent 28 percent more hours learning
than those without such access.\98\
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\96\ As a Brookings report from 2020 detailed (https://
www.brookings.edu/articles/realizing-the-promise-how-can-education-
technology-improve-learning-for-all/) educational technology has the
potential to positively impact student outcomes, particularly in core
reading and numeracy skills.
\97\ See, e.g., Monica Anderson & Andrew Perrin, PEW RESEARCH
CENTER, (Oct. 26, 2018), https://www.pewresearch.org/fact-tank/2018/10/
26/nearly-one-in-five-teens-cant-always-finish-their-homework-because-
of-the-digital-divide/ (finding that ``17 percent of teens say they are
often or sometimes unable to complete homework assignments because they
do not have reliable access to a computer or Internet connection'').
\98\ Kolawole Ogundari, Student access to technology at home and
learning hours during COVID-19 in the U.S, Educational Research for
Policy and Practice (May 2023), https://www.ncbi.nlm.nih.gov/pmc/
articles/PMC10176282/pdf/10671_2023_Article_9342.pdf.
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In short, I believe the United States is capable of both using
technology to improve educational outcomes for school children, while
also protecting children from potential harms from the use of
technology. I would hope that we could all agree with those goals and
develop policies accordingly.
Question 9. You cite a study based on an input-output model by
Sprintson and Oughton.\99\
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\99\ 2-10-24 Unlinked. Sprintson, M. and Oughton, E.J. 2023. The
contribution of U.S. broadband infrastructure subsidy and investment
programs to GDP using input-output modeling (arxiv.org)
a. Are you aware that the authors relied on an Input-Output model
that is unrelated to ACP, and that uses no empirical evidence from ACP?
Answer. Yes. As the authors make clear, they are using models ``to
explore the potential macroeconomic impacts of broadband spending to
Gross Domestic Product (GDP) and supply chain linkages.'' It is common
for economic papers to use existing data to create models that estimate
the likely outcome of various policies. Some prove to be more accurate
than others, but we should acknowledge that in developing public
policies, much as the private sector does in evaluating large capital
allocations, we don't have the luxury of waiting for perfect data to
evaluate the precise outcome. Hindsight can be 20/20 but it is also
true that waiting can prove counterproductive.
b. Are you aware that the authors relied on an Input-Output model
that shows that any increased spending on the information sector would
increase GDP disproportionately?
Answer. This was brought to my attention at the hearing.
c. In evaluating ACP, should the Committee rely on studies, such as
Sprintson and Oughton, that offer no empirical evidence of the effects
of ACP?
Answer. I think that is a fair question and I appreciated some of
the comments and questions at the hearing. I will say for myself that
the questions made me more reluctant to cite the study in the future.
But if I can add two other points, the problems with the Sprintson/
Oughton study should not be used to disregard the many other studies I
cited, including the Horrigan study, the telehealth studies, the
education studies, the job training and placement studies, and others.
Many of them do not have specific data on ACP but that does not mean
they should be disregarded in terms of projecting where the puck is
going in terms of the impact of connectivity on the cost and outcomes
of various healthcare, educational, job training and job placement
services, among other services now online.
Second, the question raises a good point about the need to dig
deeper into the studies all sides in good faith bring to the debate.
In that regard, I would note that one of the witnesses produced a
study (the EPIC study) that concluded that ACP led to inflation in
broadband services.\100\ In addressing your question of which studies
Congress should rely on, I think the EPIC study demonstrates the very
problem you raise. While I am not an economist, my over two decades of
working with institutional investors in communications causes me to
immediately see several material problems with the study.
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\100\ https://epicforamerica.org/publications/bidenomics-goes-
online-increasing-the-costs-of-high-speed-internet/
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First, it is empirically wrong. As a filing to the Committee from a
conservative think tank, R Street, noted ``According to recent studies,
the most popular broadband speed tier plan prices dropped by 18.1
percent during ACP implementation.'' \101\ The letter further noted
that ``recently-published research found that not only do Internet
Service Providers (ISPs) pass cost savings on to their customers, but
they also are `not inflating prices to appropriate government
subsidies, and the ACP is successfully reducing the cost of Internet
plans for eligible households.' '' \102\
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\101\ The letter cited Arthur Menko, 2023 Broadband Pricing Index
Broadband Prices Continue to Decline, USTelecom https://ustelecom.org/
wp-content/uploads/2023/10/USTelecom-2023-BPI-Report-final.pdf (last
visited Apr. 30, 2024).
\102\ Here, the letter cited Schieberl, River and Ahmadi, Nikki,
Measuring the Success of the Affordable Connectivity Program (July 31,
2023) https://ssrn.com/abstract=458690 or https://dx.doi.org/10.2139/
ssrn.4528690
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The Bureau of Labor statistics offers data consistent with the R
Street observation. Its Consumer Price Index for ``internet services
and electronic information providers in U.S. city average, all urban
customers, comparing January 2021 to January 2024,'' found that prices
had dropped 7.8 percent, which compares quite favorably to another
network business, electricity, for which prices rose 9 percent.\103\
The index for all prices in those three years show an increase of 17.9
percent.\104\
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\103\ https://www.ncta.com/broadband-affordability. This does not
include an adjustment for increases in speed, which would, if added,
show a decrease of 80 percent. But for purposes of this analysis, we
are using the standard BLS CPI data.
\104\ https://www.bls.gov/opub/ted/2024/consumer-prices-up-3-1-
percent-from-january-2023-to-january-2024.htm. The data set provides
the data for 22-23 (an increase of 6.4 percent) and 21-22 (an increase
of 7.5 percent).
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Further, even the FCC Urban Rate Survey on which the EPIC study
relies demonstrates exactly the opposite of what the EPIC model would
predict. That survey concludes that prices for lower speed offers rose
5.4 percent between 2020 and 2023, well below the general rate of
inflation in those years. So, the price differences EPIC uses to make
its claims took place in speed and price tiers not likely to be
relevant for ACP-eligible households.\105\
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\105\ https://www.fcc.gov/economics-analytics/industry-analysis-
division/urban-rate-survey-
data-resources
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The key error made by the EPIC study errors is that it relies on
pricing data that doesn't reflect the experiences of ACP subscribers.
The FCC's Urban Rate Survey tells us the prices ISPs offer in the
marketplace. It tells us nothing about what we want to know about ACP
subscribers: what they pay for the services they subscribe to using the
ACP benefit. In addition, the Urban Rate Survey data doesn't include
mobile, but a significant portion of ACP enrollment is mobile (as
discussed earlier). So EPIC is comparing the price of fixed to trends
in a mixed fixed/mobile program. This raises significant questions
about whether the resulting correlations are meaningless. In other
words, the data that is the foundation of the EPIC study does not have
a sufficiently clear link to the pricing relevant for ACP subscribers.
Further, any analysis of price and ACP uptake needs to happen at
``apples-to-apples'' levels of geographic granularity. The EPIC study
does not do this. It aggregates ACP enrollment to the state level (when
zip code level ACP enrollment data is available) and compares it to
statewide ACP enrollment and statewide pricing data. That's like saying
ACP enrollment rates in the Bronx somehow have something to do with
prices of service offerings in Westchester County NY. As I believe any
person working for ISPs on pricing strategy would tell you, they don't.
Second, the EPIC study is theoretically wrong. Anyone who
understands communications networks would incorporate into their
analysis that communications networks are a shared resource for which
the greater the number of customers using the network, the lower the
per user cost structure for the provider. That is, the networks involve
high capital expenditures but low incremental costs, so the greater the
number of customers, the lower the per user cost. While we can argue
about how many new customers ACP created or how many intermittent
customers were kept on by virtue of the ACP, there should be no
argument that the per user cost to the ISP would go down, not up, by
virtue of the ACP. We can also argue about the competitive intensity of
the broadband services market, but we should all agree that if there is
a competitive dynamic and the cost structure per user goes down, the
price should also go down. That understanding, however, is absent in
the analysis of the EPIC study.
Third, it is logically wrong. Think of it this way. There are two
kinds of broadband customers; those relying on ACP and those who don't.
As to the first group, whether they previously purchased broadband
or not, ACP meant that as a practical matter, they were paying less for
broadband. So as to that group, ACP is clearly deflationary.
As to the second group, they would be unaffected by ACP. That is,
they are not eligible to receive it. But as noted above, as the ACP
lowers the cost structure for the ISPs, if anything, it should reduce
prices. As further noted above, it is illogical to think that ACP
enrollment rates in the Bronx somehow have something to do with prices
of service offerings in Westchester County NY.
Further, to believe that ACP would cause ISPs to increase prices
for those who don't receive ACP requires the belief that the ISPs have
been charging non-ACP recipients less than what would be the profit-
maximizing price. I do not mean this as any criticism of the ISPs, who
are, and should be, profit maximizing enterprises. But having spent
most of the last two plus decades advising institutional investors who
invest in ISPs, I believe that my clients would be, at a minimum,
highly skeptical of any study dependent on an assumption that the ISPs
charged less than what they could to maximize profits.
In addition, there are also a number of technical problems with the
study. For example, the study's time-frame doesn't hold up, as it looks
at price changes from 2021 to 2022. (It uses the 2023 FCC Urban Rate
Survey which is 2022 data). That is probably not the right time-frame
for an ACP analysis.\106\
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\106\ The EPIC study's methodology notes are too sparse for me to
be certain but based on the limited citations the study does provide,
it appears the study is comparing ACP enrollment rates from 2022 to
2023 to FCC Urban Rate Survey data for 2021 to 2022 (i.e., the 2022 and
2023 Urban Rate Survey datasets). As a result, its entire analysis may
attribute 2022 trends in broadband prices to 2023 trends in ACP
enrollment, which would be, to put it mildly, problematic. Again, while
I am not an economist, I am fairly certain that future activities
cannot be seen as causing actions in the past. Except, of course, in
the Terminator movie series.
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Further, it ignores the predecessor program, the EBB.\107\ In
addition, the study does not control for quality changes in broadband
(e.g., higher speeds). Also, the Urban Rate Survey data on which the
study relies doesn't consider promotions or bundles; it's basically the
rack rate for broadband. As anyone who knows the industry understands,
a significant number of subscribers pay an amount less than the rack
rate.
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\107\ In this regard, there is also an interesting historical
error. While the study notes the ACP predecessor, the Emergency
Broadband Benefit (EBB), it does not incorporate the subsidy, 67
percent larger than the ACP subsidy, into its model. If the study's
model were correct, the EBB should have caused a greater level of
inflation than the smaller ACP subsidy. Further, and curiously, the
paper says the benefits were ``similar.'' I have never read a study in
which an economist refers to a benefit 67 percent greater than another
as ``similar.'' Again, while I am not an economist, I don't believe the
numbers, in this context, are similar.
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So, your question about how to weigh various studies is
appropriate. Again, I appreciate being directed to areas where one
study I cited might have a deficiency. I would hope, however, that in
fairness and in a good faith effort to develop policy that serves the
public interest, even when we lack perfect information, that all sides
consider the validity of studies they have cited.
Question 10. Your written testimony noted various affiliations.
Which companies that receive ACP have you or your employers received
funding from since the program's inception?
Answer. As noted in my testimony, my views are my personal views
and do not represent any institution in which I am affiliated. In terms
of employment, I am an equity analyst with New Street Research, a
global equity research firm focused on telecommunications, tech, and
media. All my work at New Street Research is paid for by institutional
investors, none of whom receive any ACP funding. Over 96 percent of New
Street Research revenues are from institutional investors. While
checking to make sure I was correct in my assumption that none of New
Street's compensation comes from entities receiving ACP funding, I
discovered that New Street has done a consulting project for an entity
that does receive ACP dollars. The project was not related to ACP, and
I did not work on the project, nor was I aware of it. The project
involved a sum that was approximately 0.11 percent of the firm's
revenues.
Let me also note that the question--perhaps unintentionally--
carries the subtle suggestion that the only enterprises that care about
the ACP are the ones who have received funding from the program since
the program's inception. While it is true that telecommunications
providers support continuing the program, so do many organizations
outside of telecommunications. For example--and in support of what I
wrote in the several questions related to healthcare, the American
Hospital Association wrote a letter to the several Senators in support
of extending the ACP program.\108\ While they are not directly
compensated through the ACP program, it wrote that ACP ``can support
patients' access to certain services like telehealth visits, hospital
at home, patient portals and electronic patient records, virtual
scheduling, and remote patient monitoring--which are not possible
without reliable internet.'' It further noted that the ACP is ``also
critical in continuing efforts to reduce disparities and advance health
equity by giving patients in rural and underserved areas the necessary
resources to utilize various forms of telehealth, as well as other
digital health services.'' Similarly, the United States Chamber of
Commerce (along with many local Chambers of Commerce) endorsed the ACP
extension, writing that the ``program's focus on Internet affordability
serves as a critical tool to help connect all Americans, empower full
participation in the 21st Century economy and broaden access to
critical services such as education, healthcare and banking.'' \109\
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\108\ https://www.aha.org/2024-05-07-aha-letter-support-affordable-
connectivity-program-extension-act-2024.
\109\ https://www.uschamber.com/technology/broadband/u-s-chamber-
comments-in-support-of-the-affordable-connectivity-program-extension-
act
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In short, no one should be under the impression that the only
companies who benefit from the ACP are telecommunications providers. As
my testimony and answers to these questions, I hope, make clear, at
this point, everyone benefits from universal adoption of broadband.
Let me close by again thanking the Committee for the opportunity to
share my views on this important topic and thanking the Senator for the
opportunity to answer specific questions that my initial testimony
raised. I hope the answers are helpful in leading to an efficient and
sustainable policy for enabling all to afford broadband on a continuing
basis.
______
Response to Written Question Submitted by Hon. Ted Cruz to
Paul Winfree, Ph.D.
Affordable Connectivity Program
Question 1. During the hearing you cited a report by the National
Review showing that companies treat the $30 ACP subsidy as the new
price floor. Are there any other interesting conclusions from the
report?
Answer. The National Review used Internet archives to document how
companies were offering low prices--as low as $10--for broadband
services prior to the ACP. After ACP, these same offerings, or similar
ones were offered at the ACP subsidy amount: $30.
Quote from the February 15, 2024 National Review:
A $30 subsidy for low-income households means AT&T could raise
prices by up to $20 per month, and low-income households would
still get Internet service at no cost to them. And sure enough,
the price now advertised on AT&T's website for a faster ``low-
cost Internet service for eligible households'' is $30 per
month. (See this page from the Wayback Machine with the same
URL in 2021 advertising service for $10 per month.) In a
February 2022 press release, AT&T straightforwardly advertised
its new low-cost plans as being ``the best monthly rate
possible--$0'' with enrollment in the ACP. ``New `Access from
AT&T' Plan + New Federal Benefit = Free Internet,'' the release
was titled.
It is also worth noting that many Internet companies are now
advertising high-speed Internet plans for $30 per month or less with no
fees or data caps, according to a May 31st White House statement.
[all]